Lemony Snicket even notes this in A Series of Unfortunate Events, when he points out that family members know each other very well and in real life, a child would certainly know the difference between their grandmother and a wolf in a bonnet, glasses, and nightgown.
In Hoodwinked, the Wolf's disguise is a plastic Granny facial mask, and an apron. Fortunately, it's subverted: Red comes in, and this is the first thing that happens when she sees "Granny":
Red Puckett: Your face looks really weird, granny.
The Wolf: I've been sick, I... uh... [gestures to his chest]
Red Puckett: Your mouth doesn't move when you talk.
The Wolf:[adjusting his mask] Oh, uh, plastic surgery. Grandma's had a little work done. Now come on over here. Let's have a look at you. [Red steps closer]
Red Puckett: So, what's going on, "grandma"?
Oh, and as an added bonus, he doesn't bother using gloves to hide his furry hands.
The film and books A Series of Unfortunate Events spoofed this, via Count Olaf appearing in countless bad disguises, with no one but the main characters able to recognize him. Really averted in the film: Jim Carrey has been made up to the point where he's almost unrecognizable. When he appears as Stephano, it's almost impossible for you to tell that he's the same person as Count Olaf. When he appears as Captain Sham, though, in the market, his appearance (the hair, namely) is a little less disguised and you can tell it's Olaf a lot more easily. This latter one is supported by the appearance of one of the women in Olaf's acting troupe turning and saying "Kids, today" with a dramatic chord and a crack of thunder.
This was parodied even further in MAD's spoof of the books, where Count Olaf's disguise of choice was a T-shirt that read "I am not Count Olaf". And it worked perfectly.
Taken Up to Eleven in The Hostile Hospital (book eight), where Klaus and Sunny disguise themselves with surgical masks and doctor coats, and somehow manage to fool Esme and Olaf's goons into believing they were the white powdered faced women.
Justified in John Buchan's spy novels, at great length: pretending to be someone else with a heavy disguise is taken to be nowhere near as effective as becoming someone else in every way: mannerisms, way of thought, bearing. See below for a real life example.
Even the normally competent Carrot falls prey to this trope, being too honest at heart not to bungle such a deception. When required to appear in disguise, he dons a fake nose/glasses/mustache set from a joke shop, which Angua points out is actually intended for a potato. Subverted in that he fools no one at all, and is snidely addressed by another character as "Mr. Spuddy Face".
The dwarves of the Disc in general are unable to lie and are quite Literal-Minded, so Carrot, having been raised as a dwarf, isn't quite able to grasp deception.
Played straight and subverted at the same time in Moving Pictures. The staff of Unseen University are attending the grand opening of CMOT Dibbler's film. The problem is, they simultaneously wish to use their prestige as wizards to skip to the front of the line and also not let it be known that wizards would be interested in something so pedestrian as a motion picture. The solution is to stick blatantly obvious wires in their beards, hooking over their ears so as to make it look like they are wearing paper-thin wizard disguises.
Sometimes HP Lovecraft's stories can unfortunately drift into this territory, as it's hard to believe that a walking mass of maggots wrapped in a cloak, or an alien fungus in a bathrobe and stolen human face, could fool anyone over the age of three.
To be fair, the fungus was in a dark room, and the observer did get the feeling there was something amiss.
There is a Hungarian fairy tale about three con men who somehow got a tamed bear and decide to use him for a con. They don him the clothes of a deliriously drunk rich man, go to a merchant and claim that the bear really was the baron of the gypsies who wanted to buy a feast for his marriage. (They taught the bear to say the word "Igen", Hungarian for "yes", so the con goes like this: Con Man: "Sir, should we buy this barrel of beer?" - Bear: "Igen, igen.") The merchant really is fooled.
In Watership Down, El-ahrairah's companion Rabscuttle passes for a divine messenger by sticking leaves in his ears, dyeing his tail red, and holding a cigarette in his mouth. Justified because for a rabbit, this is quite an elaborate disguise, and the primary goal was to confuse the (rather gullible) audience.
One of The Adventures of Samurai Cat books has a Lovecraftian monster trying to hitch a ride ... by "disguising his hideousness with kerchief, raincoat, and black nylons." A truck driver actually offered him a ride, but — turned on by the nylons — got fresh with the monster, who called him a beast and beat him to death with his own truck.
In contrast to the Latex Perfection of the film adaptation, the disguise in Madame Doubtfire is simply the costume of a pantomime dame the father used to play. That the mother didn't immediately recognise her ex-husband is puzzling enough, but it becomes downright baffling when it is revealed she actually took the children to see the very show the character featured in, using the same name no less.
Subverted in Lois Bujold's novel Brothers in Arms, where Miles Vorkosigan is forced to assume his covert role as mercenary admiral Miles Naismith and occupy his real rank and role (a lieutenant in the Barrayaran military) at the same time. On the same planet (Earth). Miles worries that two identical, very short, hyperactive nonresidents appearing at the same time will raise eyebrows in various intelligence services, but his cousin Ivan scoffs that on a planet like Earth, they have to have six of everything. Ivan was wrong; they had three. Miles' cloned evil twin is also on planet. "Admiral Naismith" manages to talk his away out of a perceptive reporter's suspicions by pretending to be his own clone, justified in-universe.
Subverted in George RR Martin's Tuf Voyaging: Tuf wears a paper thin disguise on a world where all the natives were half a meter shorter than him. He believes the disguise is working until another off-worlder explains that the natives are too polite acknowledge his identity when he obviously wanted to be left alone. On his second visit, the world famous Tuf wears a new disguise only to have his Dramatic Unmask fizzle, since he looks nothing like the actor who plays Tuf in that world's movies.
In A Song of Ice and Fire, Jaime Lannister makes a pretty good effort at a disguise by growing a scraggly beard and shaving his head. However, no one who's ever seen him before is fooled for an instant.
Lampshaded in James Branch Cabell's SMIRE.... "No, my dear company, I assure you that your disguise has completely deceived me."
Pooh, pretending to be a small black cloud by covering himself with mud and dangling from the end of a blue balloon. And singing a little Cloud Song, such as a cloud might sing.
Pooh: "What do I look like?"
Christopher Robin: "You look like a Bear holding on to a balloon."
Pooh: "Not," (Anxiously) "—not like a small black cloud in a blue sky?"
Christopher Robin: "Not very much."
In Poul Anderson's novel Mirkheim, David Falkayn disguises himself as one of his jailers (after he and his companions had overpowered them) by darkening his hair and creating a fake mustache with chocolate sauce. It helps that the disguise only has to fool non-humanoid aliens and is seen only via comlink and inside a spacesuit (the jailer's spacesuit, clearly marked as such).
Firebird (Lackey): Ilya's monster costume is scraps of leather and cow horns. However, the monsters are so damn stupid that it works
In Caliban's War, Holden grows a beard in an attempt to disguise himself. It fools exactly no one.
Avasarala: What happened to his face?
Soren: The reporting officer suggested the beard was intended as a disguise.
Avasrala: Well, thank God he didn't put on a pair of glasses, we might never have figured it out.
In Erin Morgenstern's The Night Circus, all Celia has to do to disguise herself and move unnoticed about the circus is don some colored clothes, rather than its trademark black and white.
In the Rainbow Magic series, the girls, goblins, and Jack Frost have used these at some point.