Understanding reality that Matrix talks about

Once lived a mighty king named Raj Vardhana in the southern part of India, his subject loved him as he always treated them fairly. King had a lovely wife and 4 beautiful children, he had everything he wanted, an empire, wealth, power, subjects who praised him like a god, and everything else he desired. But all that happiness was not long-lived, his neighbor empire attacked his kingdom and due to the treachery of one his courtier, he lost the entire kingdom. King and his family fled away but unfortunately during the escape, he lost his wife, and later in the forest, he lost his children as well. Everything was lost in a moment, the king was disheartened beyond words, he had nothing left to live for. His condition became such that his own countrymen were unable to recognize him, there was nothing left with him that could be used to tell that he was once a king to a mighty empire. Few days passed and the king was still wandering from one village to another, in hope of that someone might recognize him and help him to get some clothes and food. Being a king, his ego didn't allow him to beg for alms, this continued for a few weeks but ultimately his hunger became unbearable and he had to let go of his ego. 

The King had grown so thin and week that there was hardly any flesh left in his body, his entire skeleton was popping out of his flesh. The King was covered in blood, mud and all his royal clothes became tattered by now. He was ready to beg but luckily he found a bit of hope as someone was serving 'Bhandara' at the nearby temple. King used to regularly visit that temple to pray and all the priests were personally familiar with the king, he tried to meet the head priest but people didn't allow him. King was hoping that once the priest recognizes he doesn't need to stand in the queue to get his food, but nothing of that sort happened, later he also joined the queue like other beggars. As king turn came there was hardly any porridge left in the container and all he could get was the scrappings, seeing his bowl filled with food after weeks, tears of sorrow and happiness rolled over his cheeks. As he was about to take the first gulp, a bird came over and knocked his bowl, all the hope that he felt after seeing food after weeks was lost in an instant. This incident broke him completely and he started shouting and crying in agony, pain, and misery. All that suffering had become unbearable and he was shouting why god, why? Why you did this to me, why you took everything from me? What wrong have I done? 

Suddenly he felt a sudden shakedown in his entire body and he saw his wife asking him what were you dreaming O' mighty king? King was puzzled and confused and was still feeling that unbearable pain. He couldn't sleep that entire night. For the next few days he stopped attending all the official meetings, he was in total derangement. King was running like a mad man in the entire palace shouting is this true or was that true? Nobody could understand what he meant by that, later a yogi/scholar came to the palace knowing that the king had lost his mind. He just glanced the king and said to him, O' dear king 'Neither that was true, nor is this",  this calmed him a bit. Later yogi went to explain it further, he said everything you experience either in the dreaming state or waking state is just a manifestation of your brain, when you are in a dream, there is nothing to tell you that it is not real, and the same happens in the waking state. You know that you were dreaming because you woke up from that, apart from that there is nothing that gives it away that the entire world you experienced during your sleep was not real. You can feel every emotion in dreams as well be it joy, happiness, misery, pain, or love, but when you wake up from that you don't feel connected to that dream, same is with the waking world, what you think belongs to you right now is not much different from what you experienced in your dreams. Once you realize that waking reality is also a dream, there is no pain, and misery left in the world. The only thing that is real in both the waking and dreaming world is you, the observer. The observer is the only truth and everything else may or may not exist in reality but what an observer experience is the only thing that forms his/her reality, nothing matters except for what you experience. A dog might see a tree differently than a human and no one is right or wrong about what is the actual nature of that tree. 

So, this is an adaptation of a story from Mandukya Upanishad, for all those who didn't get the point of the story, basically, we all are living in a world as showcased in the Matrix movie, everything is just an illusion, we wake and sleep in those illusions and when we wake from our dreams in those illusions, we think that this world is the real one because it is not possible to have an illusion after waking from the illusion of a dream. Even the observer effect in quantum mechanics says something similar that nothing actually exists in the entire universe until it is observed by a conscious being. Another theory in psychology called Solipsism also talks about the same, it says that everyone and everything is just happening in your brain, nothing exists, no one exists, it's only your mind that is making you see things, eyes don't see, your brain does, same light falls on the retina of a human and an insect but both of them see reality in a totally different way, their brain is making them see different things. Even Einstein once asked a reporter 'Do you see that tree? The reporter said yes, Einstein replied, there is no tree present there, it's only because you are looking at it, that tree becomes a reality'

Fun fact: Matrix 3 ends with a Sanskrit shloka and the concept of the matrix is well explained in Vishnu Purana where our entire universe is considered to be a figment of Lord Vishnu.