A company in "our" world has made a VR utopia world called City 5. To enter City 5, physical world inhabitants must be scanned and uploaded. This is explained by the company in charge as scanning them to go to Mars, not to join City 5, so many of the inhabitants are unaware of what they're going to. In Richard's case, he doesn't even know about the scan and upload, which results in the creation of Adam. Those who live in City 5 are not aware of that they're in a simulated world, so there's an option to wipe their memories in the upload.