"If men were ever in a state in which they did not want to know or could not perceive truth (facts or evidence), then Fantasy would languish until they were cured. If they ever get into that state (it would not seem at all impossible), Fantasy will perish, and become Morbid Delusion." (Tolkien, 127 - 128)
A quote from Tolkien's "On Fairy Stories" worth analyzing - if we are unable or unwilling to see truths in reality, the Fantastic will be warped, as we will be unable to distinguish fantasy from reality. Not only does it "not seem at all impossible", I would suggest that our world is currently plagued by those unable to honestly assess "facts and evidence".
We have believers of numerous religions, unwilling to accept anyone's faith but their own. This leads to such nonsense as a creation museum, where dinosaurs pull carts made by men (not shown here, but look at the video of the Commercial to get an idea). I would say this qualifies under people that "could not perceive truth (facts or evidence)". On a different level, we have many people with a lack of imagination. They are able, but unwilling, to examine the facts of society's problems and then extrapolate possible solutions. If you can't imagine, or empathize with, what other people experience (things you "did not want to know"), there is a lack of creativity in dealing with problems. If you can't imagine solutions to problems you face, then you become powerless. You accept the situation you are in. This leads to hopelessness.
Worse, on the larger, political level, you accept the status quo. You seek nothing, find no new solutions and accept the way things have always been done. This leads to the political stagnation we find ourselves in - deception and corruption in politics, financially over-the-top benefits for the wealthy while everyone else moves along blindly, apparently powerless. Bread and circuses indeed.
Fortunately, the inability to work with the truths and evidence of life does not affect everyone. So while some Fantasy IS Morbid Delusion (again, the dinosaur pulling the man's farm cart is really the perfect example), the role of fantasy in our lives, created by rational people, is to enable imagination. It is real creation from real people, using fantasy to explore possibilities.
And here is where Tolkien's Recovery is a useful term. He discusses the problem of humans when they come to believe that everything is a part of them. This is in the sense that the individual believes he or she is central to everything - someone who believes the world revolves around them. We might say egotist. As Tolkien writes, "Of course, fairy-stories are not the only means of recovery, or prophylactic against loss. Humility is enough." (Tolkien, 129).
"Humility". The ability to see oneself as part of a whole and not necessarily the most important part. Creative fantasy aims to describe something new. This brings recovery - the seeing of old things in a new light - as we experience the world's simple things in a new way. Humility follows when we appreciate the intricacy of the connections between people, animals, plants, the planet, the stars, etc. The fantastic elements in these stories are there to bring wonder to us, but they also serve to enforce the wonder of the real elements that they echo and help describe.
It is almost as if Fantasy is an adjective for the real world.
Tolkien, J.R.R. "On Fairy Stories". A Tolkien Miscellany. New York, SFBC Science Fiction Printing: June 2002.