folsense took its name from another nintendo game: professor layton and the diabolical box. in the game, when layton and luke arrive in folsense, they see a beautiful, glamorous and brightly lit city. however this is not the true form of folsense. most of its residents percieve folsense in the same way the professor and luke do, but in truth folsense is a large, but mostly desolated town.

turns out that the residents and visitors were actually hallucitaing the bright and charming folsense due to a gas that spread through town - the subconsious minds of the residents prefered remembering their town as it once were, and layton and co by the old pictures they had seen.

and that's where the towns name comes from "folsense" as in "false sense"

animal crossing folsense tries to embrace the this duality - the brightly lit colorful appearance, and the run down and deserted truth.