In AD 383, the king of Former Qin (秦朝), Fu Jian (fú jiān 苻坚), led a huge army to attack Eastern Jin.

After losing the first round of fighting, Fu Jian looked down from a city wall, and was terrified when he saw the formidable battle array of the Eastern Jin army.

And then looking at the mountains around, he mistook the grass and trees for enemy soldiers.

As a result, when the nervous Fu Jian led his army into battle, it suffered a crushing defeat.

This idiom describes how one can defeat oneself by imaging difficulties.