Sometimes we hear the negative in what others say and delete the positive, even when they are both in the same sentence. In the same way, if we did not distort we would stifle our creativity. When you are planning to redecorate, it is useful to be able to imagine what a room is going to look like when it is finished. This is sensory distortion. But if you decide that when someone looks at you in a certain way they are really despising you, you run the risk of distorting the meaning of their look and then distorting your response.
Fantasy builds on fantasy.
When you generalize you aim to make sense of the world and know what to expect. This means that when you encounter a door handle that is differently shaped from any you have seen before, you do not have to retire puzzled. You know it is just another kind of handle. So generalization is a basic part of how we learn. But the same process can spell disaster.