When Pinocchio becomes an animated wooden puppet, he is not truly alive yet. He cannot experience life because he does not know right from wrong.
Foolishly, he finds himself in many undesirable situations. He follows whatever looks interesting or entertaining to him.
He ends up in an entertainer’s cage, and he almost becomes a donkey on Pleasure Island. Following his interests gets him into trouble. There are natural consequences to his actions.
As a wooden, one-dimensional character, he must undergo a transformation to learn right from wrong. It is only after he learns the value of the truth that he can become a real boy.
Pinocchio does not make this decision to become a real, living boy by himself. He is judged based on his ethical decision making.
Similar to how Pinocchio is judged by the fairy Tinker Bell, we are all judged for our actions too. If we learn right from wrong, we earn eternal life in Heaven. We come to life too when we understand the power of our conscience.