Medicine is increasingly taught in immersive simulated environments, to supplement the apprenticeship model of work-based learning. Clinical research on this educational practice focuses on its realism, defined as a property of simulation technology. We treat realism as a function of subjective but collectively organised perception and imbued with fantasy, which we define by drawing on Lacanian studies of virtual reality and workplace organisation. Data from an observational study of four simulation centres in London teaching hospitals is drawn on to present an account of what was taught and learned about medicine, including medical failure, when medical practice was simulated.