A fantasy is what you do intentionally. Having a wild fantasy, ohh, how good life could have been if I were king of England!!, I could have done this, I could have had that. Intentional thinking or imagining of something, which is often unrealistic. An illusion on the other hand, is unintentional. It is caused by some other external forces which makes us believe something false. Like mirage in the desert is an illusion. Even if you try, you can not control not seeing dry sands as water. But, if you are fantasizing, you may snap your fingers and come back to reality.

A fantasy is some mental image that is unreal or fantastic. An illusion involves making people believe that they are sensing something that is actually not real. A person entertaining a fantasy usually knows that the image he or she has in the mind is not real. With an illusion on the other hand, the person may believe he or she is actually seeing or hearing something that is not there. Any good magician is good at creating an illusion - a rabbit appearing from nowhere out of a hat. The person seeing the illusion may know that it is indeed not reel, but cannot explain what they are seeing or hearing - again, a magician makes my point here.