This is one of the keys to Tolkien’s literary philosophy. If you have to “throw the camera a wink” while getting the audience to buy into your fiction, then you’ve broken the spell and are operating on a much lower level.
Here he quotes Andrew Lang, who compiled several large collections of fairy-tale literature. In it, Lang expresses the common belief that only children can appreciate a lot of these stores because they are too gullible and inexperienced to know better. (They haven’t read Richard Dawkins so they don’t know that God, or any other sorts of gods don’t actually exist. Too bad for them, right?)
Tolkien argues that children are a lot smarter than we think and that being able to clearly understand what is “real” (part of the primary world) and what is only “real” in the story (the secondary world) is actually key to them enjoying the story in the first place.
The introduction to the first of the series speaks of “children to whom and for whom they are told.” “They represent,” he says, “the young age of man true to his early loves, and have his unblunted edge of belief, a fresh appetite for marvels.” ” ‘Is it true?’ ” he says, “is the great question children ask.”
I suspect that belief and appetite for marvels are here regarded as identical or as closely related. They are radically different, though the appetite for marvels is not at once or at first differentiated by a growing human mind from its general appetite. It seems fairly clear that Lang was using belief in its ordinary sense: belief that a thing exists or can happen in the real (primary) world. If so, then I fear that Lang’s words, stripped of sentiment, can only imply that the teller of marvellous tales to children must, or may, or at any rate does trade on their credulity, on the lack of experience which makes it less easy for children to distinguish fact from fiction in particular cases, though the distinction in itself is fundamental to the sane human mind, and to fairy-stories.
Children are capable, of course, of literary belief, when the story-maker’s art is good enough to produce it. That state of mind has been called “willing suspension of disbelief.” But this does not seem to me a good description of what happens. What really happens is that the story-maker proves a successful “sub-creator.” He makes a Secondary World which your mind can enter. Inside it, what he relates is “true”: it accords with the laws of that world. You therefore believe it, while you are, as it were, inside. The moment disbelief arises, the spell is broken; the magic, or rather art, has failed. You are then out in the Primary World again, looking at the little abortive Secondary World from outside.
-J.R.R. Tolkien, On Fairy-Stories, (Children)
You’ll find this idea mentioned often in the ~15 hour making-of commentary to the Lord of the Rings movies. It was a guiding principal in the direction of the entire film: Everything MUST look like it’s real – a piece out of history. We can’t say to the audience, “OK, this next part is kind of silly/fantastic/whatever, just bear with us, OK?” That would break the spell and ruin everything.
Now, obviously they didn’t always accomplish this, but they still managed too remarkably often I think.