Continuity mistake: In the beginning of the movie Dorothy comes running into the farm and starts to, but doesn't completely unfasten the strap around her books. In the next shot the strap is in her hand. (00:02:20)
Continuity mistake: As he escapes Toto runs up the drawbridge and moves a foot to the left between shots than back again. (01:17:30)
Continuity mistake: When they first meet the Tin Man, the Scarecrow is holding an apple in each hand. He drops the one in his right hand but the other one disappears when he reaches for the oil can. Later when they all walk away both apples, and the one that Dorothy dropped before, are gone. (00:44:05)
Continuity mistake: The Munchkin Mayor's watch keeps changing time, from nearly to the hour, to twenty after the hour.
Continuity mistake: When we first meet the three farmhands Hunk is leaning on the wagon's break pad. In the next shot he's not. (00:03:05)
Continuity mistake: At the end of the movie, when Dorothy sits up, from the side shot her hair is shown going down her back, but in the front shot, her hair is in the front.
Continuity mistake: When the companions are walking down the corridor to the wizard's room, Toto is on their left side. Then, the camera view suddenly cuts to being behind them, and in which case, Toto is suddenly on their right side.
Continuity mistake: As they all leave the poppy field the artificial snow has been neatly swept off the Yellow Brick road, and all traces of the snow on the ground are gone in the next shot. (00:57:30)
Continuity mistake: As Dorothy walks on the pigsty there are two grown pigs and about eight piglets in there. When she falls in more than 12 grown pigs now appear in the sty. (00:03:55)
Continuity mistake: As the Tin Man crowns the Cowardly Lion watch closely as he flings his ax behind him and it falls off the edge of stage. Two shots later its back again resting on the steps. (01:06:00)
Continuity mistake: When the Tin Man is telling his story, as he says "I was chopping that tree," Dorothy starts to look at the tree he's referring to, but in the next shot, she's looking right at the Tin Man again.
Continuity mistake: In the beginning of the movie Dorothy comes running into the farm and there's an old tire hanging from a tree. Two shots later as she walks away from Aunt Em and Uncle Henry the tire has been moved. The angle at which it hangs has been changed and the piece of rope hanging on the bottom of it is now three or four inches closer to dead center than it was before. (00:03:00)
Continuity mistake: Just before Aunt Em and the others go into the storm cellar there are two glass jugs on top of the shelf on the right of their back door. When we see the spot again a few seconds later as Dorothy stands there the jugs are gone. They're not on the floor either. (00:16:40)
Continuity mistake: As Toto escapes from the Wicked Witch there's a mortar and pestle to the left of the hourglass. In a close-up Dorothy looks at the hourglass after the Wicked Witch turns it over and we see the pestle has been moved to the other side of the mortar. There will be no confusion about this if you look at the direction of the shadow cast by the hour glass. (01:18:20)
Continuity mistake: Inside the Emerald City, when they are at the palace entrance, the guard's mustache is turned up in the first shot, and is turned down in his next shot. (01:04:45)
Continuity mistake: When Toto escapes, he runs up to the three putting the Scarecrow back together and the Tin Man has nothing in his left hand. In the next shot the ax appears in his hand. (01:19:40)
Continuity mistake: As the Wicked Witch is melting the peak of her hat stays intact. In the very next shot it has been flattened. (01:26:45)
Continuity mistake: In the very beginning of the film, as Dorothy and Toto are running down the road towards the farm, you can see a small grease spot on Dorothy's apron when she reaches down to pick Toto up. When they reach the farm, somehow the spot has vanished.
Continuity mistake: In the poppy field, when Dorothy points at the Emerald City, the Lion is standing more than a meter away from her. In the close-up he stands very close to her.
Continuity mistake: In the haunted forest, when the Tin Man is lifted up in the air, the Lion crouches and covers his face with his paws. A frame later he is standing up in a totally different position.
Answer: In the film it's left ambiguous. At the end it's strongly implied that she was dreaming. The characters she meets all look like people she actually knows. In the original book, she actually went to Oz.