> I still dislike the term "hallucinations". It comes across like the model did something wrong. It did not, as factually wrong outputs happen per design.

While I do see the issue with the word hallucination providing a humanization to the models, I have yet to come up or see a word that so well explains the problem to non technical people. And quite frankly those are the people that need to understand that this problem still very much exists and is likely never going away.

Technically yeah the model is doing exactly what it is supposed to do and you could argue that all of its output is "hallucination". But for most people the idea of a hallucinated answer is easy enough to understand without diving into how the systems work, and just confusing them more.