Imagination in itself is not "make believe" but creativity of the mind. When that creativity is released by doing something with it, it becomes a product of that "vision" or visualization you experienced within your mind. The product can be art, poetry, music, or magick...
The creative side of your brain is the left. It is also your "receptive" or intuitive side. The right is your analytical, logical side. By using the left side of your brain with the use of visualization, you can in effect, grasp a reality that has yet been made and make it. When you concentrate on this reality and use it within meditation, spellwork, ritual, etc, you have created a clear focus that you can then use your will to manifest it.
Psychologically, visualization can help us weed through our problems and create scenarios that can aid us in finding resolutions and clarity. In magick, it is used in much the same way, except we take it to another level.