From : The Matrix as Metaphysics.
The Matrix presents a version of an old philosophical fable: the brain in a vat. A disembodied brain is floating in a vat, inside a scientist's laboratory. The scientist has arranged that the brain will be stimulated with the same sort of inputs that a normal embodied brain receives. To do this, the brain is connected to a giant computer simulation of a world. The simulation determines which inputs the brain receives. When the brain produces outputs, these are fed back into the simulation. The internal state of the brain is just like that of a normal brain, despite the fact that it lacks a body. From the brain's point of view, things seem very much as they seem to you and me.
The brain is massively deluded, it seems. It has all sorts of false beliefs about the world. It believes that it has a body, but it has no body. It believes that it is walking outside in the sunlight, but in fact it is inside a dark lab. It believes it is one place, when in fact it may be somewhere quite different. Perhaps it thinks it is in Tucson, when it is actually in Australia, or even in outer space.
The whole article is a must read for all those interested in the philosophical problems surrounding the merging of humans and machines.
This envatment hypothesis is the continuation of Socrates' Allegory of the Cave. I guess humans just don't trust their senses. Today, our ideas of the merging of humans with computers and machines are posing new problems, which Chalmer's deals with in his article.