Mental frames are the biased and limited way in which information is perceived or understood. Because the human brain is inherently biased and limited, we are always in some mental frame. That frame determines how we relate to and understand reality. As far as you can tell, that frame is reality.
This is why the world seems better when we are happy, and worse when we are sad. It is also a reason that people on "the other side" of an issue seem so stupid, misinformed, and out of touch with reality. Not surprisingly, mental frames are often discussed with respect to politics. However, their scope and importance goes well beyond that -- they ultimately determine not only our perceptions, but our whole mindset about what is valuable, practical, or dangerous, and what behaviors are responsible and acceptable.
If someone pursues their passions, are they boldly living life to the fullest, or are they simply being frivolous and irresponsible? The answer, of course, depends on your frame.
Perhaps you might prefer to be objective about reality and escape these limiting frames. Unfortunately, that's not really an option, at least not while we are stuck with these monkey brains inside our heads. Although it is nice to attempt objectivity, we must accept that we are human, and therefore limited. To deny that and claim true objectivity is to deny the truth and be stuck in a very limiting and annoying frame.
Mental frames help to explain why some people needlessly stay in bad jobs, bad relationships, or other bad situations -- in their reality, it makes sense. Clearly, some frames are better than others (from my perspective :).
Here's the good news: You can switch frames!
Many influences can shift your frame, such as reading books or taking a walk in the park, but one of the most powerful influences is the people around us. We tend to synchronize frames with our friends, family, co-workers, and anyone else we encounter (including the people on tv), though obviously some of those people are more influential than others.
Therefore, if you want to change your reality, change your surroundings. Find people with a more attractive reality, and live with them. This is very important. When you spend a lot of time with people, their reality becomes your reality.
For example, if you are interested in startups, but work in a big company, you are in danger. If you stay there too long, you will be drawn into the big company frame shared by the other "lifers". Startups will all seem too risky, frivolous, or impractical, and you'll spend the rest of your life in that big company (and posting bitter comments on TechCrunch).
Similarly, if you dream of pursuing some other career or lifestyle that is not shared by the people around you, then you either need to accept that it's not going to happen, or you need to change your situation.
Please note: I'm not suggesting that you completely cut off contact with people outside of your desired frame (that's how cults operate, btw). To the contrary, it's good to keep in contact with a wide variety of people -- that will help provide perspective and keep you from becoming trapped in your new frame (which might not be as great as it seemed from the outside). What I am suggesting is that your target frame should have significant representation in your life (like 50%), or at the very least, some minimal representation (5%) so that it doesn't completely fade from your reality.
Update: To better understand frames, think of a time when you were excited about an idea or possibility (or anything else), but when you shared that thought with someone else, they somehow ridiculed, doubted, or otherwise criticized it. How did that make you feel about the idea? Were you a little less excited, more doubtful, or perhaps even somewhat embarrassed about it? If so, you've just entered further into their frame -- their reality is becoming your reality. If you want to nurture your dreams, it's better to share them with people whose frame is compatible with the dream.
Read my previous post on reality. What am I doing to your frame?
Update Two: One of the commenters on news.yc suggests that if everyone really were in their own frame/reality, then it would be impossible to communicate or build products for other people. This is a good point, and it would be true if our frames were completely disjoint. Fortunately, they are not -- we always have something in common. However, the more our frames differ, the more trouble we have communicating. This is why it can be so difficult to communicate with a broad audience, such as on a blog, and why I've decided to write primarily for those with similar frames (because it's easier).
For more thoughts on how your mental frame affects your life, there are some interesting posts on Steve Olson's blog (though he uses the term 'belief system').