Recently I was reading an essay by the great writer Joan Didion, considered on of the pioneers of what's called the New Journalism, in which the writer injects his or her own personal feelings and thoughts into coverage of the story. At one point I expected the word "illusion" to pop up, but was surprised to find instead that the word used was "delusion". Obviously I did not appreciate the difference between these two words, so I decided to investigate.
The difference turns out to be fairly straightforward. Both words refer to false perceptions, but "illusion" is a false perception about something outside of ourselves, while "delusion" refers to a false perception about something within ourselves. Think of "optical illusions" regarding the former, and "delusions of grandeur" regarding the latter.
The actual passage, from the essay "On Self-Respect", is that "innocence ends when one is stripped of the delusion that one likes oneself". The dictionary definitions of "illusion" are broad enough to allow that word to be used here, but accurate usage does require "delusion" here, so Ms. Didion is correct, because she is referring to a false perception within ourselves.