The last two quotes come from his famous ‘Apologie for Poetrie’ which is a defence of invention: an argument against those people who felt, uneasily, that it was somehow wrong and childish to concern themselves with something ‘untrue’. (Plato was an early example. And they still exist today...) All fiction is invention. The perceived gulf between fantasy and realism is more mirage than fact. Sidney wrote:
I think truly, that of all writers under the sun the poet is the least liar… for the poet, he nothing affirms, and therefore never lieth. For the poet never maketh any circles about your imagination, to conjure you to believe for true what he writes.
I love that! 'No circles about your imagination': if you know that what you are reading is given to you as pure invention, not history or fact, you no longer have to grapple with belief, and you are free to apprehend the truth of the poet's imagination. Sidney goes on to point out that - surely - only a fool would call Aesop's fables lies, or mistake a play for something 'real':
None so simple would say that Aesop lied in his tales of the beasts; for whoso thinks that Aesop writ it for actually true were well worthy to have his name catalogued among the beasts he writeth of. What child is there that, coming to a play, and seeing Thebes written in great letters upon an old door, doth believe that it is Thebes?
Nevertheless, Aesop's fictional fables present succinct truths. They are not about animals, though they appear to be, but about human morals and behaviour. To miss that would be to miss the whole point.
Sidney’s argument is still valid today. The books most likely to deceive are those apparently realistic works which may or may not be well-researched. No one supposes a story about a unicorn ever really happened, but how can we know, without checking, whether a story set during World War II has any basis in fact? Sidney's further point is that fiction (or poetry) teaches truth of another sort:
No learning is so good as that which teacheth and moveth to virtue, and none can better both teach and move thereto than Poetry.
Whatever Sidney meant by virtue (and judging by his death I think he meant right behaviour: courage, courtesy, gallantry, truthfulness), in modern terms, fiction provides insights that history and science cannot: it allows us to see life from other viewpoints than our own, and to explore our own world via the mirrorlands of metaphor and fancy. We must defend poetic truth: for if we do not, we may find ourselves wrecked on the stony shores of fundamentalism, where Aesop's fables are taught in schools as natural history, and Thebes written upon an old door is Thebes indeed.
Image: Sir Philip Sidney, National Portrait Gallery, London