I’ve known people well who have this. No, they don’t forget / recover memories, and a lot of things they “remember” never happened the way they remember them - but that’s true of a lot of memories every person has. Memories change over time (eyewitness unreliability is infamous). What did really happen is trauma, and dissociation is a symptom of PTSD from a very young age (as Maggie says), so young the child doesn’t really have a fully developed sense of who they are.
As for do people know about it when they have it, the problem is, they do and don’t at the same time. What they have is the ability to keep themselves from thinking about the trauma by pretending it happened to someone else, so hard they believe it. Yes, in a way it’s indistinguishable from being a good liar, in the sense that that’s what good liars do too in a lot of cases, pretend really hard that the lie is true so they can convince others of it. But it’s more problematic because they really do lose their sense of themselves as a single person with a continuous identity.
As best I can tell, people with an extreme form of this don’t really have a self the way most people do (a “me” that believes it’s the real person making all the decisions etc, which is rather an illusion itself btw), and all the “identities” they have are made up in that it’s them pretending to be someone, while most of their mind concentrates on not having a PTSD episode about the stuff they aren’t remembering. It isn’t exactly multiple personalities, which is why the name got changed to dissociative identity disorder.
It’s not that hard to believe. People present themselves as an individual in partial ways all the time (as I know from experience and from reading about, for example in Goffman’s Presentation of Self in Everyday Life to name one well regarded source) and those aspects of yourself have real being in their way of making you act. Also consider how actors portray characters and often those characters seem to take on a life of their own, or characters in books do too apart from the author creating them. So it’s not that far fetched to happen.
Denial seems to be along the lines of denial that animals have feelings. It’s just in the mind so difficult to get hard evidence so some people simply prefer to remain skeptical. But the circumstantial evidence is pretty strong. And it’s not like I have a personal stake in it being true or not. I’m not writing a book about it or treating patients. Just interacting with people as best I can.
And whether or not memories can be recovered, they can definitely be created. I also know someone who remembers abuse that never actually happened. She’s kind of sensitive about it, but I’m pretty sure even she knows it couldn’t have happened. It’s still upsetting to remember it, though.
As for recovered memories: I have one of these. My father died in a way that I found kind of traumatic. I remembered that he died, but I “suppressed” the memory of how he died to the point where I simply didn’t remember it in that I didn’t think about it for 8 years or so. Then someone else died in a similar way nearby and the memory just came flooding back and I felt like I was reliving it and had “recovered” it. And I verified it in that my sister had remembered it all along and my “recovered” version was just like the real thing.