As a toddler, what your child learned and thought was often right out there in the open. In the preschool years, nearly all of this takes place, literally, all in his head. Your child will think, create, imagine, play make-believe—and you won't know the half of it.
But you can still see your child's mental development through the ideas that he actualizes. An exciting development in the fourth year is your preschooler's blossoming ability to make what he imagines actually come true. In his mind's eye, perhaps he sees the color blue; then he puts a brush in the blue paint and applies it to paper. Voilá! Blue. Or he may come up with an elaborate game of make-believe. Then, on his own, he gathers all the props he needs to act it out. Indeed, your child may know what he wants so precisely that he will accept no substitutes and may get frustrated if he can't find the exact scarf or stick he's looking for.
What your preschooler imagines may become as real to him as anything he can perceive through his senses. For example, he may begin to create imaginary friends. If he does, he may insist that you recognize this "friend," too. He may ask you to set a place at the table for his friend, or to make sure his friend can see the book you're reading, too. Try to indulge (within reason) your child's insistence that the imagined is real. Having imaginary friends rarely indicates any underlying psychological disturbance. In fact, it's a great way for your child to exercise his creativity and imagination.
Despite spinning out elaborate worlds of imagination, your preschooler will become better able to distinguish between fantasy and reality. Increasing language skills play an important part in helping make this distinction clearer. Your three-year-old can now recognize the truth at least some of the time (although he may not always honor it).