We are limited to two types of flying, Visual Flight Rules (look out of the window and use the pretty view to navigate and fly by) and Instrument Flight Rules (nothing to see outside so use a miriad of dials and displays to navigate and fly by).
Not really correct, and I would suggest it may be unhelpful to those pilots whose license privileges (which is another way of saying time and money) limit them to VFR flight rules.
What I would call "smarter VFR pilots" navigate using instrument methods even if flying under visual flight rules.
Obviously I don't know everything but in 600+ hours over 4-5 years have never been lost, "uncertain of position", scared (except when scared by a mad instructor), etc etc so I guess I know a little bit about this stuff, and this is what I've been doing since the day after my PPL skills test.
Also, a lot of UK pilots are limited to VFR only when flying outside the UK.
As regards IFR, actually the name of the game is to get into VMC, below cloud or above cloud. Nobody likes to sit in cloud; it's usually bumpy and there is the risk of airframe icing.