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Reality is equally shaped by both internal processes and external surroundings. This is because, in order to understand and "learn" what something is one must have the cognitive ability to differentiate one thing from another as well as the external elements to support a concept. Other than that, we would be grouping and categorizing everything we see as one and the same thing. As a result our perception of reality will be greatly flawed.
If we go by the psychoanalytical theories of Freud, we see that he is the primary advocate of internal vs external reality. To paraphrase Freud, his argument is that the different processes that take part in your brain create concepts. These concepts are then supported, or discarded, by your external sources, or your immediate environment.
To make the concept even simpler, consider this: You cannot learn what something is, unless you can put your five senses and your own experiences into the process of understanding. Hence, the environment will eventually help you conceptualize the reality of something. Even if your mental processes are flawed by way of a mental illness or condition, there is still a huge chance that you will conceptualize something, using all the elements that surround you. That is how the external environment helps solidify internal concepts. This is a cognitive perspective to a psychological concept.
Socially speaking, this is conversely translated into social skills: Once you understand what something is, it is up to you to decide whether you want to keep or discard what you learned.
This applies, for instance, to kids born into violent, dysfunctional families. The child's internal processes of self-defense, fear, etc are supported by a very bad external situation and the child is likely to understand that violence is the norm. HOWEVER- Once the child matures and has a chance to be in a different external system where there is nurturing and peace, the learned behaviors of violence may become extinct if there is enough support for it. It is a form of conditioning that can certainly change the views of reality in one person by helping him understand that there is much more than what meets the eye.
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