To the innkeeper and his guests, Don Quixote's imagination is a spectacle and a way for them to entertain themselves at someone else's expense. They do not see what he sees, and so they mock him. Their world becomes colder and crueler because of this; they will not permit their imaginations to see a greater beauty in the world, and so for them this beauty not only doesn't exits, but is worthy of derision. This makes Cervantes point about fashioning the world in the way we want it to be even stronger than Don Quixote's fancifulness on its own. Another incident that illustrates the same basic points comes closer to the close of the novel, when Don Quixote dreams that he is fighting a giant. During the course of the dream, he slashes open wine skins, believing he is spilling the giant's blood and even severing its head, thus fulfilling the quest he has set for himself. When the landlord sees what he has done, he leaps upon Don Quixote, "and with his clenched fist began to pummel him in such a way, that if Cardenio and the curate had not dragged him off, he would have brought the war of the giant to an end" (Cervantes, chapter XXXV). The landlord is enraged about his spilled wine, and meanwhile Don Quixote doesn't wake up even with the severity of the beating he receives. The tow men's different views on what happened clearly illustrate the creation of beauty -- and despair -- through the interpretation of the mind.

When Don Quixote finally awakes, he does not believe that he has had a dream, but rather is convinced that he has, in fact, slain the giant....

Through his imagination, he has the luxury of believing that his mission has been accomplished and that he therefore has some claim to the maiden for whom he was fighting. Furthermore, he attributes the beating he felt to an enchantment in the house, which is also used to explain the missing head of the giant. Rather than see that he was foolishly flailing a sword about and beaten by an enraged landlord, Don Quixote sees a victory for himself despite the sorcery used to stand in his way. The landlord, meanwhile, is left only with a loss of wine on his mind -- he cannot bring himself to see any humor or valiance in the scene. Each of their mindsets dictates their reality, and thus their ultimate happiness and success. For Don Quixote, it was and will always remain a beautiful battle and victory, despite the enchantments that ruined his prize, and for the landlord it will always only be so much lost wine.
Don Quixote is a book about the power of imagination, and about a willingness to remake the world in the ways we would like it to be. Most of the characters in the novel see this as a form of extreme foolishness, but Don Quixote's happiness in the world of imagination should make its beauty clear to all of us. His reality is better -- more adventurous, more honorable, and more beautiful -- than the one with which he is actually surrounded. The fact that other people cannot appreciate this does not diminish his enjoyment of his adventures in the slightest, just as the fiction of Cervantes' novel does not diminish the joy of reading it, or the beauty of the work.