The Matrix was a movie that was all about a digital reality. The premise of the movie is that everyone is contained within a simulation. Digital reality theory isn't exactly like the movie, but there are similarities between the two.
Digital Reality Theory
In short, digital reality theory states that everything in life is a simulation. There is someone or something external that is in control of all events that happen. Something or someone is also in charge of how reality is defined. People who believe in this theory can have a varying range of beliefs. One end of that range says that everyone is living in a full simulation that the average person wouldn't be able to distinguish as a simulation. The other end of the range says that digital reality theory is exactly that, a theory and not something that is really happening.
Reactions to Digital Reality Theory
The reactions to this theory are as varied as the people who believe in it. Some people react quite well to it because it means that they are able to shape their own existence to whatever they want it to be, as long as they can discern the fact that they are in a digital reality. The fact that those people believe in the theory is seen as evidence that they are able to tell that they are living in such a simulation. Other people see digital reality theory as something horrific. Those people don't like the idea of some unknown person or force being in charge of their life and determining their reality.
This is an interesting theory, whether or not you believe in it. It can also serve as a good thought exercise. The commonly accepted answer to whether or not digital reality theory is more than just a theory is that the computers of today don't have the computer power or capabilities in order to control reality to such an extent, and the nearest option, virtual reality, is quite obviously not real. Of course, the standard answer to that is that if the computers were really in control of reality, then the average person would believe that computers don't have the capability because that would be how the computers shaped reality.
Digital reality theory may be something that is recognizable from movies, but in real life, there are people to whom this theory makes a lot of sense and others who are terrified that it could be real.