My general feeling towards it is that it may or may not be true, and I don't care about whether it is, because it doesn't really matter.

His argument is flawed because it assumes the final condition, and then disguises it as a probability. It breaks down into: "ASSUMING the vast majority of entities in existence are simulated, chances are that we are among those entities." That is not the same as saying, "chances are, the majority of entities are simulated." This is pure speculation, and an interesting mental exercise, but it is in no way an argument in favour of the "we live in the Matrix" view.

Furthermore, he talks about "living in something like the Matrix" and "The Sims" as if they were analogous, when in fact, they are ENTIRELY different. The big difference being that the Sims cannot exist outside of their universe, and cannot, by definition, "wake up" from their universe. If you are a Sim, and I am the player, and I save my game and turn off the computer for the night, and reload my saved game the next morning, you, as a Sim, do not experience "darkness" or "a storm" or any kind of interruption in your existence that you notice. Why? Because your consciousness is PART of the simulation. The matrix, on the other hand, was a very, very convincing virtual reality video game. The brains that were playing said game were not part of it. You could wake someone up, and they would remember the Matrix.

Anyway, here's some fun:

http://www.youtube.com/watch?v=MMXME2pm83c