now actually getting down to reading the second part of your story and to answer your question. Well its a pretty easy question that can be answered in one word:
Pride.
Pride is part of human nature, mankind always wants to be subconciosly complimented on his successes and wants to be successful in atleast something. It is pride that causes us to act certain ways.
Take a typical debate, if you realize your wrong, do you admit it and move in or do you stubbornly dig in your heels and try to wing the debate until your opponent gives up? You do the latter, why? Because the pride lost in admitting defeat is, according to human instincts, much worse then making a fool of yourself by making stupid point that even you don't agree with.
When you have been arguing for hours over something and have gotten to the point where you want to compromise, do you? No, why? because you have been arguing and your subconscious tells you compromise is defeat, again its pride that is the issue.
Say you watch an embarrassing tv show or play an embarrassing computer game, do you talk to your friends about? no. Again you don't want people to think of you strangely. Your subconsciously want people to think your the best.
About dictatorship. I have to admit, one of the most effective political statements ever is from a George Orwell book. 'Big Brother is watching you'. The fear of being watched is truly a terrifying thought.
Do you act differently at home, school/college/work and on the internet? I do.
at home, its like full anonymity. I can do what I want and nobody will ever know what I am doing.
at school/college/work, I know the people in real life, I must maintain a good reputation etc. etc.
at internet, its partial anonymity, although nobody knows who I am, I am still judged by people. But the fact is, in my mind, it is fasces349, not me, posting right now. Even though I know fasces and me are the same person, you don't. We might meet irl and odds are we would never be able to tell who was who online or if we even went to vdip etc. (however if I said I was moderator on vdip, that would really narrow the options). The knowledge that, at least in theory, what you post on the internet wont be traced back to you makes you act differently.
The best analogy of this from an actual political treatise (rather then a famous fiction book) is Foucault's. His idea was (as video camera's weren't around back then) for everyone to live in 'glass' houses. If there was a secret police member living on your street, you didn't know which of your neighbours, and you could, at all times, be seen by your neighbours, you would act very different then how you would act at home atm.
Sex would provide less pleasure, most people probably wouldn't masturbate. You would put more thought into what you do with your leisure time, you would be less likely to break the law. etc etc.
I applied it to a fiction piece and a political theory, might as well tie it to a real life event.
Nazi Germany 1940s. The Germany SS (Nazi secret police) was widely feared. The Nazi propaganda was, unlike the Soviets, that committing treason or conspiracy wouldn't be punished until a month of so after the crime was committed. The SS was always watching you, and would instantly know when you committed said crimes. However they would give you the opportunity to redeem by reporting everyone who conspired with you. Doing so would give you a reward and everyone else would be arrested and executed.
In actuality they weren't watching, they had neither the manpower nor funds to watch even a tenth of Germans, of course the Germans didn't know this. As a result over 90% of arrests made by the SS were actually citizen arrests. The fear of being caught made it very difficult for people to conspire against the Nazi government, cause there would normally be at least 1 citizen among each rebel group who would confess due to guilt or fear.
So in conclusion pride is probably the deadliest of the 7 deadly sins. its part of human nature, and causes us to do stupid things in the name of keeping face or building a reputation.