Reality Seeds are a new loot mechanic added in Fortnite and work similar to the tents from the previous season. You can plant Reality Seeds, which grow into a Reality Sapling which you can loot for weapons and other items.
There is also a seasonal challenge in Chapter 3 Season 3 related to the same. It requires that you plant or summon Reality Saplings using Reality Seeds. You will get 15,000 XP for completing the seasonal challenge.
Where to find Reality Seeds?
Reality Seeds are available in abundance, but only around Reality Falls. Reality Falls is a new point of interest featured in Chapter 3 Season 3.
If you're a new player or haven't explored that part of the map, it won't show up. You will see a '?' on the map. Simply set a marker on the '?' west of Tilted Towers and drop there for it to show up on your map.
Once you're at the location, look for large purple pods around the base of the huge glowing tree. Use your scythe to break and harvest the pod, and it will drop Reality Seeds.
When you break the purple pod, it normally drops one or two Reality Seeds, which float around the pod. You need to keep an eye out for the floating seeds.
How to plant the Reality Seeds
Once you've collected the Reality Seeds, they will show up in your inventory or hot bar. You can equip them just like you would equip any other weapon in the game. Once equipped, use your aim button to aim at the ground and plant the seeds.
If it shows a red outline, you cannot plant the seed in that area.
How to collect loot from Reality Sapling?
After planting the Reality Seed, you need to play through the game or exit it. Your sapling will grow into a plant in the next game you join. As mentioned before, your sapling will be indicated on your map.
When you join the next game, go to your sapling and clean the weed around the Sapling.
Once you've cleaned the weed, the plant will produce fruits.