Trinity, an infamous hacker, is cornered by police in an abandoned hotel. She overpowers them with superhuman abilities and escapes, but a group of sinister and superhuman black-suited Agents lead the police in a rooftop pursuit. She answers a ringing public telephone and vanishes.
Thomas Anderson is a computer programmer living a double life under the hacker alias "Neo". He believes something is wrong with the world and is puzzled by repeated online encounters with the cryptic phrase "the Matrix". Trinity contacts him, saying that a man named Morpheus can explain its meaning; however, the Agents, led by Agent Smith, apprehend Neo at his office. Undeterred, Neo meets Morpheus, who offers him a choice between a red pill that will allow him to learn the truth about the Matrix, and a blue pill that will return him to his old life. Swallowing the red pill, Neo's reality disintegrates and he awakens, naked and weak, in a liquid-filled pod, finding himself one of countless people connected by cables to an elaborate electrical system. He is rescued and brought aboard Morpheus's hovercraft, the Nebuchadnezzar.
Morpheus explains that, in the 21st century, humans waged a war against intelligent machines that they had created. When humans blocked the machines' access to solar energy, the machines began to harvest the humans' bioelectricity for power. The Matrix is a shared simulation of the world as it was in 1999 in which the minds of the harvested humans are trapped and pacified; Neo has been living in it since birth. Morpheus and his crew belong to a group of rebels who hack into the Matrix and "unplug" enslaved humans, recruiting them as rebels. The rebels' understanding of the true nature of the simulated reality allows them to bend its physical laws, granting them superhuman abilities. Neo is warned that fatal injuries within the Matrix will also kill one's physical body, and that the Agents he encountered are powerful sentient programs that eliminate threats to the system. Neo's skill during virtual combat training lends credence to Morpheus's belief that Neo is "the One", a man prophesied to lead the insurrection of enslaved humans against the machines.
The group enters the Matrix to visit the Oracle, a prophet who predicted the emergence of the One. She implies that Neo is not the One, and warns Neo that he will soon have to choose between his life and the life of Morpheus. Before they can leave the Matrix, the group is ambushed by Agents and tactical police. Morpheus allows himself to be captured so that Neo and the crew can escape. However, their getaway is hindered by Cypher, a crew member who betrayed Morpheus to Agent Smith in exchange for a comfortable life within the Matrix. Cypher disconnects and murders several crew members as they lie defenseless in the real world, before he is killed by Tank, a crewman whom he had left for dead.
In the Matrix, the Agents interrogate Morpheus in an attempt to learn his access codes to the mainframe computer in Zion, the rebel humans' last refuge in the real world. Tank proposes killing Morpheus to prevent this, but Neo, who believes that he is not the One, instead resolves to return to the Matrix to rescue Morpheus, and Trinity insists on accompanying him. They succeed in rescuing Morpheus, and in doing so Neo gains the necessary confidence in his abilities, performing feats on par with those of the Agents. Morpheus and Trinity exit the Matrix, but Smith ambushes and kills Neo before he can leave. In the real world, "sentinel" machines attack the Nebuchadnezzar, while Trinity stands over Neo and whispers to him that the Oracle told her that she would fall in love with the One. She kisses Neo, and he revives, this time with the power to perceive and control the Matrix. He effortlessly destroys Smith and leaves the Matrix in time for the ship's electromagnetic pulse weapon to disable the attacking sentinels.
Some time later, Neo makes a telephone call in the Matrix, promising the machines that he will show their prisoners "a world where anything is possible". He hangs up and flies into the sky.

Question: Even though the human population believes they are going about their normal lives, where are they really?
Answer: In pods where they are hooked up to a simulated reality.
Alternative answer: The Matrix