I hadn't really thought about the lyrics before.....but reflecting on them now helps me recognize what a great song it is lyrically (I always knew it was great musically).   

The narrator had this idealized version of this woman........and discovered it was a lie. And now realizes that this woman he loved...."she's not there". And probably was never there.

It says a lot about the delusion of the early stages of romantic love. And so concisely.