Hey All i am a young developer and in the past year I have been amazed at how many times i have heard the topic title statement from people who mean it in a funny way ( such as my mother) to people who honestly think they have the formula for the next skyrim and with a little of my time and effort they could bring it to life (Sadly usually their idea is neither that great and i am not nearly that skilled ). So I was curious how do you guys respond when someone with no game development experience attempts to begin a conversation topic like this?

I can't say i've ever been in this position, the only people whom i share my work with are my friends, and they know that i'm not going to be making them a game. they may not be programmers but they at least understand the immense amount of work that goes into making a game. other than that, i tend to keep away from telling people i'm a programmer, or am good with computers because i hate people asking me for help with their computer problems, as if i understand every button/error, on every device, for every piece of software. I get more than enough of that crap with my mom.

Kids do it. They ask; What do you do / What are you doing? And I tell them I'm working on a game. I've agreed a few times on sitting down with them to create something, but usually they get bored too fast. - Even when I pick easy stuff that's visually testable within half an hour.
With grown ups, it usually stays at the discussion stage. Other projects besides games come up quite often, and I keep stressing to them, that if I'm the only one contributing, I should be the only one given credit, -as they'd rarely have anything to contribute.
But people are different. Most know that an elder scrolls clone is not an overnight thing.

I got that once from a shocking source. One of my good friends, a fellow programmer whose focus is networking/security, pitched an insane idea to me shortly after we first met. A huge game with customizable biotics like Mass Effect, or some such nonsense. He figured we could get other CS students and kids from the art department at our school to collaborate. I didn't have the heart to tell him that even if you got every CS student and every artist at the university, he and I might still be the only two slightly decent programmers--and we may not even find a single artist as talented as the interns at Bioware.

There's also the people who just don't know anything about computers, and when they hear you're a programmer or that you make games, they think you're the next Bill Gates. I know it shouldn't, but it does irk me when people say shit like "Just remember me when you get famous." Maybe because so many people say it that I know it's just their ignorance, rather than my obvious ability to start the next biggest tech company in history. Just a guess.

People do that to me all the time. I've never heard an idea that didn't make me roll my eyes. They often think I'm capable of making games up to par with corporate titles developed by a team of hundreds. I can't really blame them for not knowing though.

During high school, there was a guy who actually wanted me and a few other people to make a game with him as the designer. He knew absolutely nothing about how game development worked though, so we all dropped out on the offer.

I think it's perfectly normal. General public have no idea what's behind the development of a game, so it is not surprising to hear and read these kind of shows.
A much common variation to the theme can be found when you read gamers saying things like: "Why game X cannot implement the feature Z from the game Y?".. or other things like "why the world can't be millions of miles big?".
It seems to me like, for the majority of people, game dev is some sort of cut and paste affair where, if you want that feature you just google for it, cut it, paste it and off to the pub. It's an eye opener to read "gamers' forums", they really think DX11 has "effects".. like you know, as in Word you select your text and make it bold, in DX11 you can click on some checkbox and get blooms, blurs, and flares in your game... they seriously think this is the case.

At the end of the day, it's not worth getting heated about this.. it's just innocent ignorance, we all have been there at a certain point, the difference is that some of us actually tried to do things and learned it was a bit different than that

Keep them talking, make a note of the good ideas, learn from the bad ideas, and make sure that next time they have an idea they share it with you.

they really think DX11 has "effects".. like you know, as in Word you select your text and make it bold, in DX11 you can click on some checkbox and get blooms, blurs, and flares in your game... they seriously think this is the case.

Thank god for engines like Unity, where blooms, blurs and flares really are just checkboxes...

I really don't know why the people creating games (rather than those creating engines) are still pretending that game development shouldn't largely comprise of toggling checkboxes in off-the-shelf packages. The sooner we get to the point where all games can be made by scripting some big, sand-boxy environment, the better.

I've had someone introduce me to their drug dealer, because a great idea for a game came to him in a dream.

I met him for dinner, discussed the concept with him. It was a fantastic concept... easy enough to make, too. I was uncomfortable going into business with him, though. (Kinda worried about getting shanked if it didn't work out.)

My instinct was pretty good, because some crazy stuff went down with him later, ending in an FBI raid. Still, it remains the best concept anyone has ever pitched to me.

So I was curious how do you guys respond when someone with no game development experience attempts to begin a conversation topic like this?

First I listen. It happened to me a lot when I was in university. Those years were very odd for me, if there was something I could still do was listening, and I did.

Unfortunately, I never heard anything which would cause me to laugh. Not even to smile. On the pro side, I never heard anything making me want to cry either. In retrospect, it was a good thing to do while sipping coffee.