One of my favorite Orthodox blogs is A Desert Seeker, written by an internet friend, Arsenios, who is a recent convert to Orthodoxy. In one of his recent posts, "saints, demons, and the supernatural," he opines on what he sees as a deficiency with many moderns--including some modern Orthodox--specifically, an inability to believe in the reality of satan, demons, and the supernatural. Corollary with this is an inability to believe in the accounts of the saints lives the seemingly 'fantastical' elements contained therein. Part of the account Arsenios shares has to do with his growing up among animists in South America, where encounters with the more "real" and less refined conception of demons was an everyday, present reality.
Encounters with demons in this fashion, though, are not confined to animists living in the jungles of other continents. The worship and supplication of the powers of darkness happens every day right here in our own little suburban, American neighborhoods. I know, because in the years between when I left Christianity (at 13) and the years where I became convinced of it again, through Orthodoxy (sometime around 22), I was involved in (and obsessed with) demonology, ceremonial occultism, and was, in general, very messed up. Depression was a constant, ever-present part of that life; and that is not surprising. To be involved with demons, who are themselves the end result of slavery to passions, is to become a slave of passions.
Perhaps this is why there are some who see them as being, essentially, some kind of external projection of our own passionate desires; the Psalms tell us that "the gods of the nations are demons" (Psalm 95 LXX), and St. Paul tells us that the idols worshiped by the nations are nothing (1 Cor. 8:4). We can see how the case could be made for the passions (logismoi) being nothing, because they have no being; but then, there are the countless passages in the scriptures and in the hagiography that depict the demons as very real. How do we resolve this?
I think that it's not really something that we should try to divide out into an either/or. If those who claim the unreality of demons mean that in an ontological sort of way--i.e. that they have no being in themselves, being created themselves, and that in trying to live separate from the source of that being, which is God, they have come as close to un-being as is possible, and thus are tortured forever by that choice of self-will--then I wholeheartedly agree. But the same St. Paul who tells us that the idols are nothing tells us that "we are not contending against flesh and blood, but against the principalities, against the powers, against the world rulers of this present darkness, against the spiritual hosts of wickedness in the heavenly places" (Eph 6:12). These agents of darkness are there, present, and supremely real, in the sense that they do, in fact, exist. St. Athanasius even goes so far as to say that the reason Christ had to be crucified on the Cross, lifted up into the air, was so complete the conquest of death in the aerial stronghold of the demons; if they weren't real, this seems wildly unnecessary.
I think we ignore their reality to our own peril. Not that we need to live in fear of the demons or their powers (which are powerless against the power of the Cross), but if we pretend that they are not real in order to make ourselves feel better, or somehow superior to our ancestors who took the demons reality very literally, we are deceiving ourselves, and any time we deceive ourselves we become somewhat more receptive to the prince of lies.