This paper considers the Cartesian theatre as a metaphor for the virtual reality models that the brain uses to make inferences about the world. This treatment derives from our attempts to understand dreaming and waking consciousness in terms of free energy minimization. The idea here is that the Cartesian theatre is not observed by an internal audience but furnishes a theatre in which fictive narratives and fantasies can be rehearsed and tested against sensory evidence. We suppose the brain is driven (...) by the imperative to infer the causes of its sensory samples; in much the same way as scientists are compelled to test hypotheses about experimental data. This recapitulates Helmholtz's notion of unconscious inference and Gregory's treatment of perception as hypothesis testing. However, we take this further and consider the active sampling of the world as the gathering of confirmatory evidence for hypotheses based on our virtual reality. The ensuing picture of consciousness resolves a number of seemingly hard problems in consciousness research and is internally consistent with current thinking in systems neuroscience and theoretical neurobiology. In this formalism, there is a dualism that distinguishes between the process of inference and the process that entails inference. This separation is reflected by the distinction between beliefs and the physical brain states that encode them. This formal approach allows us to appeal to simple but fundamental theorems in information theory and statistical thermodynamics that dissolve some of the mysterious aspects of consciousness. (shrink)