Two works are Mutually Fictionally when they reciprocate actions which establish each other as being fiction within their own respective 'verses. Characters might discuss a work, make a Shout-Out or Take That!, or the work is shown as a piece of fiction in the show and then the other work does the same. The logic- and consistency-prone viewer may go "But if that A is shown in B and A has watched B then A has watched B watching A and...oh no, I've gone cross-eyed. How can this be?"
The answer is: Because it's not real!
In some cases, the characters from Show A will actually enter the universe of Show B. In addition to finding out that they're trapped in the universe of Show B, the characters of Show A discover that they themselves are the subject of a Show A in the universe of Show B. The characters from Show A are, in essence, simultaneously Trapped in TV Land and a Refugee from TV Land. This isn't Welcome to the Real World, since both universes are depicted as being equally "real".
This is a relatively common trope used in Crossover Fan Fic.
Strictly speaking, this kind of crossover should never logically be allowed to exist. At the very least, the particular episode of each series or work which references the other should be assumed to not exist within the other's universe. Otherwise, you would have a situation wherein it would be distinctly possible for the main characters to see the TV show of their entire reality within said reality, realize their entire existence was a lie, and freak out. And we wouldn't want that, now would we?
One possible justification would be if the two worlds are simply Alternate Universes and the "shows" in question are based on visions people have from the other world. In this case, expect the characters trying to establish what in this show is correct and what is not. It could also be the case that the creators of Show B, within the universe of Show A, simply decided to set Show B in a world where the main characters of Show A don't exist, but acknowledge their impact by making them fictional instead- though this explanation breaks down if the world at large, and particularly the media, shouldn't know about the events of Show A in the first place. Unfortunately, the Fiction Identity Postulate proves that all fiction is equally unreal. And anyone living in an Alternate Universe may be, by definition, fictional.
This is where Recursive Canon meets Recursive Reality. May create an accidental Intercontinuity Crossover.
See also Celebrity Paradox. Comic Books Are Real is a one-sided version, usually dealing with a Show Within a Show instead of another real-life series. Compare Faeries Don't Believe in Humans, Either, where each side believes the other is only stories prior to meeting, but both have always been fact and that's what the stories are based on. Contrast Stable Time Loop, which leads to a similar Ontological Paradox.
