Confabulation
I have always disliked when people use the term hallucination to describe the confident mistakes LLMs print when they reach the limits of their knowledge. I think “confabulation” would be a much more accurate term.
Merriam-Webster, my preferred dictionary, doesn't define confabulation per se, so let's use Dictionary.com instead.
Dictionary.com defines hallucination as:
a sensory experience of something that does not exist outside the mind, caused by various physical and mental disorders, or by reaction to certain toxic substances, and usually manifested as visual or auditory images.
It defines confabulation as:
the replacement of a gap in a person's memory by a falsification that they believe to be true.
We don't know if LLMs experience anything, although I don't rule it out entirely, but they certainly do replace gaps in their memory with obvious falsehoods that they seem to believe.
The next time Claude or ChatGPT tells you about a business that doesn't exist, then, or describes a feature your phone doesn't have, consider that it might not be hallucinating, but rather confabulating.