Our understanding of many mental, social and physical phenomena hinges on a general understanding that appearances can differ from reality. Yet young children sometimes seem unable to understand appearance-reality dissociations. In a standard test, children are shown a deceptive object and asked what it really is and what it looks like. Many preschool children give the same answer to both questions. This error has been attributed to children's inflexible conceptual representations or inflexibility in representing their own changing beliefs. However, evidence fails to support either hypothesis: new tests show that young children generally understand appearance-reality discrepancies as well as fantasy-reality distinctions. These tests instead implicate children's failure to understand the unfamiliar discourse format of the standard test. This misunderstanding might reveal a subtler difficulty in making logical inferences about questions.