It's not about confusing them with real people. It's when virtual representations of real life get to be so good - but not quite good enough - that the viewer has this sense of something not being quite right, or revulsion. Which is pretty much what a lot of people experienced in LA Noire. The facework was good, but it didn't match the quality of the rest of the game so it created some 'immersion dissonance' in a lot of players. Just because you didn't experience it, doesn't mean we don't know what the term means.
That's why I said it ended right around the neckline, because while I thought the facial animations were good, you could tell that they were wrapped on top of standard resolution bodies and inserted into a standard resolution world with standard resolution textures.
Look at The Last of Us .gif two posts up: the face and skin are ridonkulous, but the hair is mostly static, and the bits that do move are these weird clumps that are not realistic. That's where the uncanny valley is on that. Similar thing goes on with the Repilee dolls, they are very realistic looking, and they might fool you if you casually glance at it from your peripheral, but when you look at them, there is clearly something 'not right' about them.