Okay, we'll use the British word here and call her Mum, since that's what Conor calls her. She's dying of cancer, and the entire novel centers around that fact. She adores Conor, but she lies to him, and possibly to herself, about the fact that she's not going to live. She doesn't come right out and admit that she's dying until the very end of the book, when she asks Conor to hold her hand (shades of his nightmare, no?) as she slips away.
Let's take a minute to think about all the harmless lies parents tell kids every day: Santa Claus and the Tooth Fairy are real, you only get Christmas presents if you behave yourself at all times, and if you cross your eyes and stick out your tongue, your face will freeze that way. These lies don't hurt anyone, and they serve a purpose. For example, perpetuating the myth of Santa Claus allows kids to believe in magic for as long as possible, which is not a bad way to go through (early) life. Telling them their faces will freeze that way keeps them from sticking out their tongues at people.
When Conor's mom (and dad, for that matter) tell him she'll recover, they're trying to spare him the grief and pain of her looming death. It's the natural inclination parents have toward their kids—your folks want to keep you from hurting. So when Conor's mom says, "We've been here before, Conor. So don't worry. I've gone in and they've taken care of it. That's what'll happen this time," (11.34) she's trying to protect him.
But she's not doing him any favors. She knows she's not going to recover, as evidenced by the fact that she's asked Conor's dad to come and visit. But when Conor asks why his dad's coming, instead of telling the truth, his mom says, "It's been a while since you've seen him. Aren't you excited?" (11.37). Way to change the subject, Mum.
Sure, we could make the case that Mum's living in denial too, and that she's just telling Conor what she believes. But Grandma blows the cover off that when she fights with Conor's dad in the hospital hallway. Later, when Conor and his dad go for their version of "the little talk," his dad says, "The […] reason your grandma was mad at me was because she doesn't think me or your mum have been honest enough with you. About what's really happening." (20.34)
If he didn't know it before, Conor knows at that moment that they've chosen to lie. It's the first time in the book anybody's been straight with him, and we're thinking it's a big help on his path to true coping. So consider this a note to parents everywhere: kids have eyes and ears and brains. They know what's really going down, and it's not cool to pretend they don't.