The brilliant minds that believe we are indeed in a simulation have extrapolated this concept from the weirdness that is found within the realm of quantum, the realm of the sub micro and nano.
Religious folk believe we live in some sort of simulation as well: "You are travelers and sojourners here. This is not your home. God is of spirit not of flesh."
Don't know what 'spirit' is, but it's not carbon-based matter. Don't know what home is, but it's evidently not here. The Bible suggests that nothing here is real and the only real things are found in the spiritual realm.
Simulation, or manufactured space, it doesn't really matter to us. Like Mr. Friedman pointed out, we have to deal with the space around us and whether the space around us is simulation or not is irrelevant.
In a simulation, you are just a bit of data. You can be destroyed or duplicated, multiple instance of you may exist, even at the same time.
In (most) brief of afterlife, "something in you" is unique, last forever, really do matter, etc.
so our life could still be a simulation, and, to use the religious terms, our souls would be the players
it would therefore totally make sense for life to be a simulation, just like a pilot practices in a simulation before flying a real plane.
People believe it is representative, they literally link to it as proof of their claims.
In this way (and there are many others), reality is simulated.
Another way is Indirect Realism, knowledge of which is rarely in working memory.
Another way is that people believe there is only one possible form of simulation, as in "the" simulation theory.