Logically they know they're looking at a person in a costume, unless they're a small child and still have the capacity to believe in anthropomorphic animals. But they start to act like they're actually dealing with a five-foot-something two-legged [insert species here.] I can't tell you how gratifying that is, especially if it brings a bit of magic into someone's life.
There's a phrase I once heard that seems to describe the way to look at this: "Ha ha, only serious." It means that what you're doing is, at face value, a joke or a game of some kind. But it means a lot more to you deep down, and the fact that the people around you think it's a joke or a game means that they're okay with playing along.
The best part is, no one is being deceived. The fursuiter really is what they appear to be, and the people around them choose to treat them accordingly. In a way that they wouldn't, in this world, if Yuro physically appeared to be an anthro.
(Yuro takes fursuit commissions, BTW.)