A lot of people have been speculating that August is Pinocchio... Personally, I don't see him as Pinocchio. I've suspected for quite some time that he is either Peter Pan or Rumple's son. Both make for good cases.

Peter Pan has the ability to move between worlds, flying between our world and Neverland, which could conceivably be a part of FTL. As the story goes, if Peter Pan ever spent too much time out of Neverland, he would grow up. If he happened to be out of FTL when the curse what enacted, he wouldn't be able to get back to FTL and would be stuck in our world, forced to grow up. It would also explain why he was able to enter Storybrooke, when no one else except Emma has been able to come or go. He's still a fairy tale character, and the curse effected ALL fairy tale characters, not just the ones who happened to be in FTL at the time. Maybe that also has an effect on why he knows the book is real.

But after the previews for "The Return", I'm leaning toward the theory that August is Rumple's son. It would explain why he knows about the dagger with Rumple's name on it... Baelfire was there when Rumple became the Dark One. It would also make sense of why he knows the book is real. It seems logical to me that since Rumple made the curse, he knew what the curse could do and would leave himself a few outs to break it: 1) himself remembering everything; 2) Emma being the savior; and 3) Baelfire escaping to help Emma in believing the curse is real.

Either way, I'm excited to find out more in "The Return" and "The Stranger".