Continuity mistake: When the Wizard is in the balloon, he raises his top hat pointing in an 11 o'clock direction. A frame later it's pointing in a 9 o'clock direction.
Continuity mistake: When Dorothy and the Scarecrow find the Tin Man and oil his mouth, between shots, the leaves on the Tin Man's shoulders change.






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.