The concept of digital twins is gaining acceptance and our ability to generate them is advancing [see ‘Digital twins that thrive in the real-world’ on June 9th, 2021]. It is conceivable that we will be able to simulate many real-world systems in the not-too-distant future. Perhaps not in my life-time but possibly in this century we will be able to connect these simulations together to create a computer-generated world. This raises the possibility that other forms of life might have already reached this stage of technology development and that we are living in one of their simulations. We cannot know for certain that we are not in a simulation but equally we cannot know for certain that we are in a simulation. If some other life form had reached the stage of being able to simulate the universe then there is a possibility that they would do it for entertainment, so we might exist inside the equivalent of a teenager’s smart phone, or for scientific exploration in which case we might be inside one of thousands of simulations being performed simultaneously in a lab computer to gather statistical evidence on the development of universes. It seems probable that there would be many more simulations performed for scientific research than for entertainment, so if we are in a simulation then it is more likely that the creator of the simulation is a scientist who is uninterested in this particular one in which we exist. Of course, an alternative scenario is that humans become extinct before reaching the stage of being able to simulate the world or the universe. If extinction occurs as a result of our inability to manage the technological advances, which would allow us to simulate the world, then it seems less likely that other life forms would have avoided this fate and so the probability that we are in a simulation should be reduced. You could also question whether other life forms would have the same motivations or desires to create computer simulations of evolutionary history. There are lots of reasons for doubting that we are in a computer simulation but it does not seem possible to be certain about it.
David J Chalmers explains the probability that we are in a simulation much more elegantly and comprehensively than me in his book Reality+; virtual worlds and the problems of philosophy, published by Penguin in 2022.