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The 360ºillusion is a design ideal where the aim is to make the physical immersive experience as complete as possible, i.e. 360 degrees around you. In its most basic form this means that everything you can see is ingame, but can reach much farther than that; also meaning that every interaction must be as real as possible and that anything that can be made to function for real should be done, instead of using symbolics.
Examples of 360º illusion
Lets say the player encounters a trail leading to a door, and the door is locked with a padlock. In standard larp format that door might be unlocked and the lock just a symbolic lock that certain players may bypass because their characters know how to pick locks.
In a 360º larp situation the door would be a real door, and the lock would be a real padlock, requiring the players to actually pick the lock in order to open the door.
The classical way of portraying magic at larps is highly abstracted symbolism; fireballs and invisibility spells. At a 360º larp only "magic" that can actually be performed without symbolism is allowed; lights, remote communication etc.