Proponents of simulation theory have frequently drawn parallels between the kind of biographical thinking involved in simulation and the creative processes through which novelists create characters. The psychologist and novelist Keith Oatley has been one of the most important advocates of the view that fiction itself is a kind of simulation—in his words, 'a simulation that runs on minds of readers'. In the blog OnFiction, which he co-authors with some other academics interested in the relation between psychology and fiction, he describes this position along with hinting at some of its implications. One such implication is that our reading of fiction can be expected to give our mind-reading abilities a thorough work-out. A similar view has been put forward by Lisa Zunshine, who has argued that one of the pleasures of fictional prose is the way it challenges our theory of mind. Working out who thinks what about whom is a mental challenge which constantly brings us, as expert readers and novices ones, back to storyworlds.
You can read Keith's post here.