In terms of our experience, things that are right side up look right side up. But it is true that the image that is projected on our retina is flipped. This is because light entering the eye goes through our ‘lens’ which convex on both sides (like a squished soccer ball- but clear).
The cool thing about our brain is that it is ‘plastic’ meaning that it can change itself and adapt to new situations. One example of this is that if you wear a pair of glasses that flip everything upside down (meaning the image on the back of your eye is now right side up), for a while you will walk around disorientated… but then your brain flips it! So everything looks ok! When you take the glasses off again, your brain has to do it all over again and switch back. This is called ‘perceptual adaptation’.
Pretty cool huh? Go brain, go! 🙂
A simple camera model is called a Pinhole Camera. In this light passes though a small hole and is projected onto a rear screen, upside down – similar to what Nancy said.
You can see a figure here http://en.wikipedia.org/wiki/Pinhole_camera
(The upside down tree one).
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