Oz came from elsewhere, somewhere plain. He was a ventriloquist, circus showman by trade, simply bored of life but landed there by accident. The people there thought he was basically a god, a “wizard” because he came from the skys. He decided to use his showman-circus-ship to just go along with it and rule as a liar about who he was. But real good (and evil) rulers existed in this land, with real powers (talent, earned respect, “magic over things of earth”), so he decided to use his showmanship to create a fake vision of himself in the throne area to scare them into thinking he was great too. At one point when he was caught “he rubbed his hands together.” This is all an analogy of the real world. However what bothered me is dorthy agreed to pretend he was still a great wizard. So she could just get what she wanted at the time, and so he could keep ruling over a people who thought he was someone else.