I left a comment (by Chris C.) about his interpretation of time, but having never finished a class on relativity (yet), I'm hoping some physicist can examine my comment because I seriously did pull most of my conjectures out of my butt while I was writing it. But it makes sense based on what I knew.
We lack sufficient evidence to prove that we reside in a Matrix-like construct. Pending evidence, we shall continue believing that we do not live in such a construct.... though the line between physical reality and virtual reality become blurrier every day.
Crude synopsis: if it is possible to create such an simulation then the probability that we in one is the number of possible simulated universes (v. large) vs the number of real universes (1) ie high probability that we are within a simulation.
I've always heard that expressed as the Simulation Paradox: either full-fidelity simulations, a la The Matrix, are impossible, or we're already in one.
What is possible? Everything. It just depends on what level we are able to effectively manipulate the universe. Suppose for a moment that the universe is comprised of 'bits' at the very smallest possible scales. We do not currently have direct (root) access to these bits, so we must manipulate them from within the system. Because our universe is NP-complete, given enough control over these universal bits, anything that is thinkable is possible. Will we ever be able to control these bits? It remains to be seen, but I should think so eventually.
Proof: universe = 42 (Adams 1978). 42 can be computed in O(1) time. Therefore, universe is in P. If one problem in the set of NP-complete problems is in P, they are all in P. Therefore, P = NP.
http://www.fqxi.org/community/forum/category/31416