1)Real in it's effects. Or possibly even real if a person could convince himself that he is possesed, which would, on a subconscious level, actually create this demon. Since dreams, schizophrenia or any other peculiar mental states are real, then perhaps so could demons in this style. But of course, there wouldn't actually be any demons, but some self induced mental disorder. In which case, making demons nonexistant. It's pretty sad that people manage to create more problems for themselves than "needed". But so do we all, so it's hard to judge.

2)People become deluded by the stories, become hysterical or are already mental. If something happens in nature, then there is an explanation without god.