Visible crew/equipment: Dorothy asks the Wicked Witch, "What are you gonna do with my dog? and a stage light shines against the painted backdrop outside her window. (01:16:20)
Visible crew/equipment: In Munchkinland as the Wicked Witch of the West walks over to her sister the shadow of the cameraman can be seen going across the Wicked Witch of The East's shoes from left to right. (00:29:40)
Visible crew/equipment: The four run away from the guards and leave the tower where the Wicked Witch is eventually melted. If you look closely in the two long shots from above them, the Tin Man reflects the bright stage light that is placed below them at the first bend of the walkway, on top of the Witch's castle. (01:25:25)
Visible crew/equipment: After we first meet the three farmhands, Dorothy asks Zeke what to do about Miss Gulch. As he walks off to feed the pigs he steps into the camera's shadow. (00:03:20)
Visible crew/equipment: After they meet the cowardly lion and all four go off dancing and singing "We're Off to See the Wizard" a stage light flickers in the upper left background. (00:52:55)
Visible crew/equipment: Studio lights are reflected in the Wicked Witch's large crystal ball, as Dorothy sits down and cries beside it, just before she sees her Auntie in it. (01:15:10)
Visible crew/equipment: Dorothy's bedroom window flies open in the tornado and the shadow of a crew member is moving on the wall on the right of the screen. (00:17:00)
Visible crew/equipment: When Dorothy walks out of her house in Munchkinland, shadows cast by the trees can be seen on the painted hills right behind them. (00:20:20)
Visible crew/equipment: There's a second window on the left of Dorothy's bed and the shadow of the stage light can be seen on the wall behind it. (00:17:15)
Visible crew/equipment: The Wicked Witch looks at them in the Haunted Forest through her crystal ball and the wires holding Nikko's wings can be seen as they flop around. (01:14:20)
Visible crew/equipment: As the Wicked Witch stands on the balcony with the hour glass a cameraman's shadow can be seen moving across it near the hour glass. (01:24:15)
Visible crew/equipment: As the Wicked Witch prepares to leave for the Emerald City on her broomstick shadows appear on the painted wall depicting the sky behind her. (00:57:50)
Visible crew/equipment: The apparatus on the Scarecrow's chest that's attached to the wires above his head can be seen sticking out in several shots as Dorothy walks up to him. (00:35:30)
Visible crew/equipment: A large equipment shadow can be seen moving onto the Yellow Brick Road in the long shot as they dance off to Oz after leaving the poppy field. (00:57:40)
Visible crew/equipment: Near the end of the movie, Dorothy says to the Wizard, "Oh, will you? Could you?" and the cameraman's shadow is seen on her dress. (01:32:35)
Visible crew/equipment: As Dorothy walks out of her house in Munchkinland the camera pans right then comes back again and the light from a spotlight dead center that has been bumped can be seen shaking above the blue brook. (00:20:20)
Visible crew/equipment: When the Wicked Witch shows Dorothy the hourglass, many stage lights are reflected all over it.
Visible crew/equipment: When the gang runs into the guard at the door, they all walk to the right of the screen to talk to him. While they're walking, you can see the shadow of the boom mic following them.
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.