Perception versus Reality

One of the many philosophical names for this position is Nominalism. It distinguishes between naming, which is an arbitrary, personal, human response, and description, which is supposed to have some consistent -- or at least recognizable -- relation with what others experience of reality.

As Alexei (and no doubt also Cory) Panshin put it in Masque World,

"There is a long-standing split among philosophers on the subject of names. Realists take them seriously, believing them to be things. Nominalists take them lightly, believing them to be means, believing them to be convenient labels. Every person in the world is either a Realist or a Nominalist. Give yourself a test: if someone called you a gigger or a fell-picker, and you knew it wasn't true, would you hit them or smile? That's how easy it is to tell.

"Valuing names as they do, Realists are sparing with them. They are likely to be known only as Joe or Bill or Plato. And they don't smile much. Nominalists have more fun. They are known as Aristotle or Decimus et Ultimus Barziza, or as Edward John Barrington Douglas-Scott-Montagu, or perhaps by one name in childhood and several others in the course of life.

"A firm Realist misses out on one of the most satisfying of human activities -- the assumption of secret identities. One who has lived and never been someone else has never lived.

"It is true that sometimes there can be embarrassment in secret identities, but only a Realist will take the whole thing seriously enough to hit you. So have your fun, and avoid Realists."

How about 'paramnesia'?

Paramnesia - A distortion of memory in which fact and fantasy are confused

Essentially influenced by the distorted views, people are unable to weed out the lies they have told themselves, the lies that are told to them and the actual truth. Hence they are oblivious from the paramnesia that they suffer from.

This is a great question. You said:

I need a word, or philosophical term that means nothing can be taken at face value or below its surface. It should convey that people's characters cannot be judged even by a book's first chapter.

Your fill in the blank sentence:

The ‘general public’ appear to be unaware of their own prejudices, hypocrisies and corrupted moral code. Lastly, everyone without distinction, is oblivious to the pseudo-reality, and as a result, the events which unfurl daily become all the more disquieting. (Other possible choices: simulation, hyperreality)

I say:

Pseudo-reality is the best single word answer to your question. It has a good basis in the way others have discussed this phenomenon, especially Daniel Boorstin, who coined the term, pseudo-events in 1962. Recently, Atlantic Magazine made the same connection I made with an article titled, The Image in the Age of Pseudo-Reality.

Another strong contender is hyperreality. It comes from postmodernism and semiotics and was coined by French scholar, Jean Baudrillard in Simulacra and Simulation in 1981. Umberto Eco also used this term in his book, Travels in Hyperreality, 1995, a series of essays taken from earlier books.

ACCORDING TO BAUDRILLARD, what has happened in postmodern culture is that our society has become so reliant on models and maps that we have lost all contact with the real world that preceded the map. Reality itself has begun merely to imitate the model, which now precedes and determines the real world.

The Image in the Age of Pseudo-Reality in Atantic Magazine, December 2016 will give you more conceptual vocabulary for discussing what interests you.

Daniel Boorstin’s 1962 classic on celebrity, fame, and America’s tenuous relationship to facts remains as poignant as it is prophetic. ... Barnum was one of the original creators and commercializers of the pseudo-event, the vaguely real-but-also-not-real thing that, the historian Daniel Boorstin argues, has been the fundamental fact of American culture since the days of Barnum himself. Or, at least, in the years between those days and the days of the mid-20th century. Boorstin’s book on the matter, The Image: A Guide to Pseudo-Events in America, was first published in 1962.

I also considered simulation as shorthand for simulated reality or simulation of reality. . We live in the age of simulation and an age of contrivance in which pseudo-events and image replace reality. Psychologically speaking, there is conscious manipulation of reality on the one hand and on the other, acceptance of surface appearance. As a culture we have poor reality testing. Overall, we are living in a world of pseudo-reality.

You can read a nice compendium of essays about this phenomenon on a website called Transparency. Read Faking It, written by the founder of the website, a journalist based in Boston, Ken Sanes. Below you is a quote from that essay and an essay about Daniel Boorstin's book, published in 1961, titled The Image: A Guide to Pseudo-Events in America.

He [Daniel Boorstin] claimed that America was living in an "age of contrivance," in which illusions and fabrications had become a dominant force in society. Public life, he said, was filled with "pseudo-events" -- staged and scripted events that were a kind of counterfeit version of actual happenings. Just as there were now counterfeit events, so, he said, there were also counterfeit people - celebrities - whose identities were being staged and scripted, to create illusions that often had no relationship to any underlying reality.

Also, from Transparency, from an essay called Faking It:

Our attempts to avoid confusion are also generating a new problem: We increasingly suspect the real and the authentic of being fake. We are thus witnessing one of the many ironies of the age of simulation: Fakes are being mistaken for the real thing and the real thing is in danger of being mistaken for a fake.

I think it is hard to come up with just one single word term to encompass a very big idea. Perhaps a vocabulary of related words is needed to discuss the broad issue of how one's sense of reality is changed by living in a media-saturated, image conscious culture. Others have suggested that there is confusion about reality that might even be called delusional. I agree.