Continuity mistake: The clouds behind the side of the mountain don't move an inch in the time it takes Toto to run and get help and return to the same spot. (01:20:00)
Continuity mistake: In the scene where the farmhouse is in the tornado, Dorothy is shown from behind with her pigtails in front of her shoulders. When the shot changes to the front, they are behind her shoulders. (00:18:05)
Continuity mistake: Outside of Prof. Marvel's trailer the wind is blowing strongly on him, but if you look under and behind the trailer the trees are not moving. (00:14:40)
Continuity mistake: In the cyclone, Toto runs up to the window and barks at a cow. In the next shot Toto is gone. (00:18:00)
Continuity mistake: When the Wizard says, "Think yourselves lucky because I'm giving you an audience tomorrow instead of 20 years from now" his hand is on the silver lever on the floor. In the next shot they are above his head. (01:28:25)
Continuity mistake: When they emerge from the woods before looking at the Emerald City, Toto runs up and stands on a rock with no tree anywhere near it. In the next shot from behind, a tree appears next to the rock. (00:54:35)
Continuity mistake: During the tornado scene while she's in her bedroom, there is a small oval picture (which looks like Elvira Gulch) over the bed which ends up sideways. As she gets up to leave after the house lands, it's straight up. (00:19:15)
Continuity mistake: When the Scarecrow says, "Won't you take me with you?" the straw from his right hand touches Dorothy's hair, but in the next shot his hand isn't even close to her. (00:38:30)
Continuity mistake: Dorothy's house just went threw a cyclone with chairs turned over, windows blown out and pictures knocked off the walls. Yet her comforter stays neatly folded and doesn't move from the bed. It's also changed and now has a plaid design on it. (00:19:05)
Continuity mistake: When Glinda walks up the steps to greet Dorothy and the rest the floor can be seen and it's quite dirty. Later when Dorothy taps her heels together the same floor has been cleaned and shined. (01:36:15 - 01:38:40)
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: The Lion holds the bug sprayer in the crook of his arm as they walk up to the sign in the Haunted Forest. In the next shot he's holding it in his hand. (01:13:10)
Continuity mistake: In the Haunted Forest, Toto comes to the Tin-man, Lion and Scarecrow, barking. In a wide shot he is standing on loads of leaves, then in a closeup, he's standing on hardly any leaves, but in the next wide shot, he's standing on lots of leaves again. (01:16:20)
Continuity mistake: During the tornado scene at the farm Dorothy runs to the back of the house and the bench is turned over - when she returns the bench is upright .
Continuity mistake: As Glinda's bubble appears Dorothy walks off camera but we still see her standing there as her shadow is on the yellow brick road. When we first see Glinda Dorothy's shadow just disappears. (00:21:30)
Continuity mistake: As she talks to the Scarecrow, Dorothy says to Toto, "Wasn't he pointing the other way?". In several of the close up shots wind is blowing her hair around and in others it isn't. (00:34:30)
Continuity mistake: As the Wicked Witch walks over to her sister a rocking chair is protruding through the broken window. In the next shot the window frame disappears and it's not a rocking chair anymore that's protruding from the window. (00:29:45)
Continuity mistake: As the Wicked Witch says, "It's so kind of you to visit me in my loneliness" a red penknife is on the ledge to their left. In the next shot it disappears. (01:16:10)
Continuity mistake: Dorothy's basket has been moved without anyone going near it after the Wicked Witch leaves the roof top. (00:46:20 - 00:47:30)
Continuity mistake: As they dance out of the poppy field, the snow that is on them disappears between shots. (00:57:35)
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.