Definition: The "personal fable" is a common teen and older tween belief that arises from adolescent egocentrism. The personal fable is the adolescent's belief that he or she is highly special and unlike anyone else who has ever walked the earth. In other words, the adolescent thinks that since others are so obviously fascinated by him (adolescent egocentrism), he must be a very unique individual (the personal fable).
Belief in the personal fable is a developmentally normal cognitive limitation. Unfortunately, though, the belief can have serious consequences. In particular, the personal fable can cause a tween or teen to believe that nothing bad could possibly happen to someone as exceptional as herself. In other words, since she's so special, she must be invulnerable. Some research has shown that belief in the personal fable and one's invulnerability is directly connected to risk-taking behaviors such as unprotected sex, use of alcohol and/or drugs, and physically dangerous acts, like driving without a license .
Belief in the personal fable should not be confused with having high self-esteem. Tweens or teens with low self-esteem usually still hold a version of the personal fable. In fact, they may even perceive their critical self-judgments as "evidence" of their particular uniqueness - i.e., no one thinks quite as critically as they do. In other words, adolescents typically all believe they are special, even if they don't necessarily think of themselves as "good" special.
Psychologist David Elkind was the first to describe the personal fable and adolescent egocentrism.
Elkind, PhD, David. Egocentrism in Adolescence. Child Development. 1967. 38: 1025-1034.