Imagine if you see the movie 'Jurassic Park'. As soon as you finish seeing the movie, I tell you EXACTLY how the special effects were achieved, EXACTLY how CGI did what it did. Will you like the move any less?
There's a lot going on here, and I wanted to chime in because I'm in the movie industry, and I like this kind of question.
First, the audience goes into a movie KNOWING with absolute certainty that everything on the screen is a carefully crafted ruse, an artificial story designed for entertainment. If there were any possibility in our minds that the actors dying on screen were truly dying, we would be horrified! So naturally if you talk about behind-the-scenes stuff, it doesn't affect the "magic" of it.
When I can see the CGI, yes, it drastically reduces my ability to immerse myself in the story and I enjoy it FAR less. This is why I don't watch movies I enjoyed back when CGI was just getting good. When I can see the green screens and CGI, I can't focus on anything else.
I actually think this goes right back to what David is saying. If the focus of the picture is on the amazing VFX, then when the pictures ages and the VFX look kind of primitive, the movie will no longer hold up to the viewer. On the other hand, if the story is emotionally engaging then (at least for most people) the VFX will not matter as much. You're invested in the characters, the emotions they're communicating, and the VFX are incidental. That's why the original Star Wars trilogy still holds up, despite some dated SFX. On the other hand, the prequels are much less popular because they relied too much on the spectacle itself, which looks worse all the time...
In this way, movies and magic are very similar: if you don't engage people on an emotional level, all they're left to look at is the visual effect. However, unlike movies, magic actually does rely on some amount of deception about the reality of what they're seeing.
Then why does a layman stop thinking magic is amazing as soon as they find out the method?
It's tricky because if you ask any lay person if they believe in real magic, most of them will probably say no--and reasonably so. Our civilization is way past that, intellectually. But I really think that in the moment when you complete a magic demonstration, if you are successful, there will be the tiniest dose of doubt being injected into the audience's world view. If you asked them point-blank if they believed in magic
now, they would probably still say no, but on the
other hand they don't have ANY OTHER EXPLANATION for what just happened! So their brain can't rule out "magic" as a possibility because it doesn't have any better ideas!
I don't have any illusions of grandeur about this. We all know it's a ruse--the audience knows, rationally, that it's a ruse. Magic isn't real. But successful magic is literally using the human psyche and the way our brain solves problems
against itself, with very entertaining results.
I believe that is why knowing the method behind something will kill the magic. Because as soon as your brain has a better explanation, it can't go back to that wonder-filled feeling that is tied to the mystery. You can't unsee the truth, and the truth is pretty ordinary.