You might want to sit down before you bend your mind with this article about nine competing theories of the multiverse (but do read it!). Here’s an extract:
The idea that what we perceive as reality is no more than a construct is quite old, of course. The Simulation Argument, as it is called, has features in common with the many layers of reality posited by some traditional Buddhist thinking. The notion of a ‘pretend’ universe, on the other hand, crops up in fiction and film — examples include the Matrix franchise and The Truman Show (1998). The thing that makes Bostrom’s idea unique is the basis on which he argues for it: a series of plausible assumptions, plus a statistical calculation.
In essence, the case goes like this. If it turns out to be possible to use computers to simulate a ‘universe’ — even just part of one — with self-aware sentient entities in it, the chances are that someone, somewhere, will do this. Furthermore, as Bostrom explained it to me, ‘Look at the way our computer simulations work. When we run a simulation of, say, the weather or of a nuclear explosion [the most complex computer simulations to date performed], we do not run them once, but many thousands, millions — even billions — of times. If it turns out that it is possible to simulate — or, more correctly, generate — conscious awareness in a machine, it would be surprising if this were done only once. More likely it would be done countless billions of times over the lifetime of the advanced civilisation that is interested in such a project.’