In Don Quixote, the reader interprets Don Quixote himself as a seemingly-insane person for the first part of the story. He believes that he is mirroring honorable knights with his behavior, but nothing that he does makes sense to the reader. He sees things as they aren't; he sees giants where there are only windmills. His behavior is silly, crazy and not admirable. Perhaps most importantly, he seems foolish.
It's this foolishness that leads Sancho to believe he can fool him into seeing a specific woman in a set of three peasant women. This is when the reader starts to see a different side of Don Quixote and when he, himself, begins to change. He sees through the trick and only sees peasants on donkeys. For the first time, the reader has to question exactly what drives Quixote and whether he's actually crazy. Cervantes begins to incorporate elements like name changes that make the world less clear to the reader as well.
By the end, Don Quixote acknowledges that he's been crazy. He's more of a figure of nobility at the end of his life than he was on his adventures. He tells his loved ones that he'll never stop doing what needs to be done for them. He warns his niece against ever marrying a man who reads the kinds of books that inspired his journeys. At this point, the initial impression of Don Quixote himself, and the story, has completely changed for the reader. He is to be—at least somewhat—admired.