Here's what we know experimentally: when you measure something, it looks like it has a definite value. (Math version: the measured value is always an eigenvalue of the hermitian operator corresponding to the measurement. Even if a system started in a mixed state, it always seems to end up in the eigenbasis corresponding to the measured eigenvalue.)
"Measurement" is any process that carries information about the state of the system. When I get hit in the back of the head with a photon from a distant planet, I'm measuring its position.
What QM does not know is why this seems to be the case. There are many theories. (Plug for Einselection.) But just about any serious theory happens at time and energy scales so small that it doesn't make sense to consider the interaction of consciousness with wave function collapse. If there's no objective reality, the "subjectivity" probably only exists at scales too small to notice without an experimental setup.
You can also look at data display problems the same way. Take a height map of the world, and just blindly use a rainbow mapping, and you won't be able to see sea level. But if you pick two color spectrums, say, beige and blue, and suddenly it pops out.
He's basically saying that it makes sense for our brain to lie to use fir the same reason; some data is too valuable to not stand out to us. And this holds for any given organism.
"We are all just brains in vats in a giant floating supercomputer storage facility in space hooked up to a networked virtual reality system! Everything we perceive is false since the true reality is brains in vats! You think that's a snake? Nope, just an AI being fed to your vat brain by the supercomputer. There's no such thing as snakes."
There's no way to prove me wrong, but it's not a really useful thought exercise either. How does that help us solve the problems we want to solve?
At best you could argue that if evolution is real, then we can't know reality, but then we would also be ignorant of evolution.
First, I pull in the paper "Why Philosophers Should Care About Computational Complexity": http://www.scottaaronson.com/papers/philos.pdf I particular commend to your attention the discussion in section four and the subsection "'Reductions' That Do All The Work".
At which point, if you understood that paper, the remainder of my argument is probably obvious. But:
Given the complexity of our incoming sense input, in order for the universe to somehow be something completely different but still meaningfully causally connected to our sensory input, there must be a transform function from the real state of the universe to the sensory experience my consciousness experiences (or "what my brain appears to be processing" or whatever you like here; the "mysteries" of consciousness are not important to my argument, I merely need "the thing that is not experiencing the true state of the universe but is making decisions somehow"). Given the ready available availability of the true (if wildly incomplete) state of the universe to these hypothetical organisms, the transform function must have been created by evolution, co-evolving with the organisms as they get more complicated.
When we say "all of reality is an illusion and it's wildly different than what we experience", we can (with a bit of handwaving) observe that if reality is supposed to be radically different than our experiences, yet the transform function somehow successfully keeps us alive as we act on our illusions, it is not unreasonably to expect the transform function to be exponential in complexity. I mean, I see a coherent "thing I think is my child", and if that's actually a three-toed sloth that can't speak or play video games, it's gonna be one heck of a transform function to maintain the illusion. However, evolution's speed can be characterized by the rate at which it can acquire bits. While there is some debate about what that speed may be, it generally considered to be linear at best in the number of generations. There is no time for such a complicated transform function to be evolved.
On the other hand, if the transform function is relatively simple, the argument degenerates to the rather pedestrian observation that humanity has known about for centuries if not millenia (depending on how you look at it), that our sense perceptions are not a completely accurate reflection of reality. But there are still significant ways in which it is a reflection of reality.
So I can not help but think that this article is one of two things: An impossible claim about the disparity between our sense impressions and reality, or a pedestrian claim about the disparity between our sense impressions and reality dressed up in very provocative, but ultimately content-free, dressing.
Incidentally, why do the experiments he run seem to confirm his point? Scale, of course. In a tiny little simulation, the differences between exponential and simple transform functions are still quite small, and evolution has plenty of room to play with outright deceptive sense functions. But as you scale up the complexity of the simulation, evolution will not be able to sustain wild illusions, only relatively simple transforms between reality and sense impression, exactly as we see in the real world. ("Relatively simple" compared to what it would take to have wildly deceptive transform functions; still complicated and we are still learning about what our real brains do, of course, but it's still the difference between "polynomial-but-large" and "exponential".)
Per Descartes' demon and/or brain-in-a-vat, etc., I can't prove very much about where our sense impressions are coming from, whether it's "real" or not. But I can say with some confidence that, where ever those sense impressions are coming from, be it a real universe or a simulation or whatever, I have no reason to believe that evolution is causing me to have those sense impressions so completely chewed on that "it's all an illusion". For that to be false would require so much about my world to be false that the very existence of "evolution" that his argument hinges on would not be a reliable fact to argue with.
How I read it, but using your words, was that he is saying that the "transform function" you mention could throw out a large amount of data about the "real world" as being unimportant, so the only things we notice are those things that evolution has deemed important enough to allow through the "transform function". Hence, our perception of reality does not match reality.
As far as gaining anything from it, I think it is an interesting thought exercise and if it could be proven that'd be cool(and his math about observation actually seems quite interesting) but I don't think any of it is likely to change human behavior in any significant way.
