I've seen it be referred to as a particular individuals' perception of the workings of their environment. Everybodies perception of reality is different, as what may be the perceived reality for someone, may not be how a different individual perceives it. Hope that makes sense to you.
The realization that you know very little about the grand scheme of thing. When you feel you have a good handle on how the World or Universe works it's just an illusion. We are just small pawns in a large chess game.