I had no idea about this. I studied neural networks briefly over 10 years ago, but hadn’t heard the term until the last year or two.

After thinking about it more, I think the main issue I have with it is that it sort of anthropomorphises the AI, which is more of an issue in applications where you’re trying to convince the consumer that the product is actually intelligent. (Edit: in the human sense of intelligence rather than what we’ve seen associated with technology in the past.)

You may be right that people could have a negative view of the word “hallucination”. I don’t personally think of schizophrenia, but I don’t know what the majority think of when they hear the word.

What I don’t like about it is that it makes it sound more benign than it is. Which also points to who decided to use that term - AI promoters/proponents.

Edit: it’s like all of the bills/acts in congress where they name them something like “The Protect Children Online Act” and you ask, “well, what does it do?” And they say something like, “it lets local police read all of your messages so they can look for any dangers to children.”