As Bjoern and Ken have indicated, these are kind of philosophical questions that physicists don't really concern themselves with, particularly when you ask, "What is the reality of the situation?"
Originally Posted by ngeo
I'm not big on philosophically oriented discussions either, but I guess I am not physicist enough to completely remain silent on some of these questions, so I will give you my feeling (read: speculation) about this "space" question.
I think of space as a real thing, like a rising loaf of bread... only apparently clear. As your Hawking quote says, space is filled with virtual particles of various sorts. And since the expansion has been determined to be accelerating, I speculate that space is also an ocean of some sort of negative vacuum energy. This is different than EM energy, and it may or not be related to the virtual particles. There is also theorized to be a "Higgs ocean" that confers mass to all the various particles, rather like a vat of molasses affects the inertia of a ball-bearing dropped into it. I don't know if the Higgs field is related to the acceleration either. The "negative pressure vacuum energy" does sound strongly reminiscent of the driving force of Guth's inflation. I forget the fine details, but the energy level of early space is thought to be very high, but then it is thought to "decay" to its ground state, as most things do. I speculate that perhaps this early vacuum energy did not decay all the way to its ground state, leaving an almost undetectable amount of this expansion energy in the "fabric" of space, which we have recently detected as "dark energy."
Again, all speculation.
Everyone is entitled to his own opinion, but not his own facts.