Holy cats the internet is amazing! I was thinking of an essay I read in college ten years ago. It was mostly about the movie "Open City" by Rossellini, but it's also about a theory of realism that has stuck in my conciousness. According to the author when we accept something as realistic in a film, it's not because it closely resembles reality, it's because it's one step beyond the last thing we accepted as realistic in a film. That's why when you see an effect in an old movie and you think, "What the hell, that's clearly a dummy, was everybody stupid in the 1930s?" it's not that they were stupid, that effect was just over the threshold of the represented real.
Anyway - I thought of this essay, typed the words "represented real" and "realism" into a search engine, and here it is, Birth of Neorealism: Open City
Peter Brunette explains how the use of these elements accomplished a sense of reality for viewers: "Conventional cinema demands a basic level of plausibility, enough to allow us to put ourselves emotionally into the created world of the film.... We perceive something as realistic...when it corresponds to a set of conventionalized expectations...about what people in movies do.... When we experience...a film as more realistic than usual...it is because it is pushing against the currently accepted boundaries of the realistic, closer toward the dangerous unpredictability of the (represented) real." (Brunette, 57).