In order to fool everyone regarding his true identity, Oz used the people's
fear, gullibility, and ignorance against them. When he arrived in a hot air
balloon, they didn't understand the physics behind it and so they thought he
was a powerful wizard. He allowed them to believe this and got them to build
the city for him. Then, he somehow manipulated them into wearing green-tinted
glasses when they were in the city and, as he states: "my people have worn
green glasses on their eyes so long that most of them think it really is an
Emerald City." Over time, the mystique around him built to the point where his
supposed acts were considered legendary and he became known as Oz the Great and
Powerful.
When Oz would have to deal with anybody first hand, he would use elaborate costuming, special effects, and his talent of ventriloquism to make...
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them believe that he was much more than he actually was. For example, when he is found out by Dorothy and Company, he explains the tricks he used against them in their first meeting:
"Oh, I am a ventriloquist," said the little man. "I can throw the sound of my voice wherever I wish, so that you thought it was coming out of the Head. Here are the other things I used to deceive you." He showed the Scarecrow the dress and the mask he had worn when he seemed to be the lovely Lady. And the Tin Woodman saw that his terrible Beast was nothing but a lot of skins, sewn together, with slats to keep their sides out. As for the Ball of Fire, the false Wizard had hung that also from the ceiling. It was really a ball of cotton, but when oil was poured upon it the ball burned fiercely.
Because Oz had certain advantages over those he colonized, he was able to make them think he was great and powerful. However, as is often the case, when people stop believing what they are told and begin to think for themselves, they find ways to see through manipulation and understand the truth.