As far as believing in deities goes, this should be understood two ways. In Vajrayana practice, 'deity' does not really convey the full meaning of Avalokiteshvara as a 'yidam'. In this context, Avalokiteshvara and other 'yidams' are visualized as personifications of one's own original enlightened mind, not as gods to be prayed to. If this sounds a bit far fetched, consider that it is done in the context of the understanding that the very real sensation of who we are when we wake up each morning is equally just a creation of our imaginations.