Oh, I'm sure most people interpret it as reality. Your reference to documentary-look is quite accurate. Commercial filmmakers used to studiously avoid lens flare, because it would not ever actually be seen by human eyes in what they were photographing.
But documentary filmmakers rarely bothered to avoid it, and so it became synonymous with realitstic ... when, of course, it is quite the opposite.
Still ... most people interpret it that way, and it's why filmmakers use it ... and overuse it.
I hate it. But that's just me. Takes me out of the story almost every time.
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