For us, Santa is real. He is the spirit of generosity. Children understand him as a literal person. Adults understand him as a symbol. Children grow up believing in Santa, then learn to become Santa.
I have no problem giving children a simplified and concrete (and fun) way to understand any complex subject. We do this in every area. We do this in academics. We do this in religion. We do this with Santa.
My conversations with my eldest went like this:
Child: "Is Santa real?"
Parent: "What do you mean by real?"
Child: (thinking) "Can you see him?"
Parent: "Hmmm. Can you see everything that's real?"
Child: "I think so."
Parent: "Is love real?"
Child: "Yes."
Parent: "Can you see it?"
Child: "No. Have you ever seen Santa?"
Parent: "No. I think maybe Santa is invisible."
Child: "Hmmmm."
She never officially said "I don't believe". So we continued to act as though she did until she was about eleven and finally rolled her eyes at us and said "You know, I do know that Santa isn't real." I grinned and said "Excellent. Want to be Santa and help me stuff stockings tonight?" It was a very sweet coming-of-age moment.
For some kids, though, this moment is not sweet at all. For some kids, it's just a "Santa is a stupid game we play with babies and you're not a baby anymore." It's as devastating as it would be if a priest got up in front of his congregation of faithful believers and said "God is actually just a lie. There's no man sitting in the clouds. You're on your own." Some kids who have had this experience may be trying to spread the news among their friends as a way to protect them from humiliation. And some are just being superior party poopers.
One way to respond to this type of thing is to say "Santa is the spirit of generosity/Christmas/love (whatever your values are). In our house, he is real. He doesn't have to be real in your house. Perhaps you have a different spirit of (whatever) at your house. Families are different. But please don't tell my child what is real at our house. Thank you."