Information-Transformation — A Generative Mechanism of World Formation and Embedded Observation

This work introduces Information-Transformation as a fundamental mechanism of world formation, proposing that information is not merely encoded or transmitted, but is the generative process through which a world arises. In this framework, the Sedimentation-Field gives rise to the Information-Realm, which further differentiates into the Imagery-Realm and the Fixed-Realm, forming a complete structure of manifestation. Information is defined as a generative process driven by Causal-Response, grounded in a Causal-Base, and structured by Principle, rather than a passive entity. Observers are not external to the world but are intrinsically embedded within this generative structure, while systematically mislocating themselves, giving rise to Situated-Observation. This model directly challenges the foundational distinction between external world and internal model in neural representation, predictive coding, and active inference, and offers a structural rethinking of representation in artificial intelligence.