I don't know if anyone has done this in real life. For example, say in a story your character is walking down the street. Bumps into someone who drops something. Then the character and the guy he bumps into start arguing about who's fault it is. A bunch of dialogue... and then something happens and the reader finds out that none of this really happened, it was all just something he imagined happened. What are some of the ways one would go about pulling this off in an actual story without confusing the reader? The only idea I can think of is to have someone interrupt him thinking by saying something, and then the character snaps back to the real world and the reader now knows that was all in his head. There's that and then just the completely direct "But none of this happened, it was all in his head" line. That just sounds too corny though.