Kayfabe is a term most closely associated with professional show wrestling. It's a code word for fake; an agreement for the insiders not to admit to the outsiders that it's fake.
Eric Weinstein has popularized the term among intellectual spheres and compared politics to pro wrestling, in the sense that maintaining perceptions seems to be the main objective. For example, consider a President who wants to get re-elected or win back the public acceptance. They want to highlight all the good they've done for the country. The President could claim responsibility for something positive (like economic growth) even when they've had no part in it, or they could outright lie that the country/economy is doing well, even when it isn't. Reality doesn't matter, perception does.
One of the reasons kayfabe exists is our desire to believe the fakery. When we expect too much of reality, we create demand for lies; it simply becomes too difficult to meet our expectations in reality, so they are met merely in perception. We don't care about the difference because we are desperate to get our expectations met. The average citizen wants their country to succeed, and the average politician wants to stay on the citizens' good side - so even if the country is doing poorly, it's preferred for both parties to perpetuate a common fantasy.