I believe it is Hinton that prefers “confabulation” to “hallucination” because it’s more accurate. The example in the discussion about hallucination/confabulation was that of someone who had been present in the room during Nixon’s Watergate conversations. Interviewed about what he heard, he provided a narrative that got many facts wrong (who said what, and what exactly was said). Later, when audio tapes surfaced, the inaccuracies in his testimony became known. However, he had “confabulated truthfully”. That is, he had made up a narrative that fit his recall as best as he was able, and the gist of it was true.
Without the ability to confabulate, he would have been unable to tell his story.
(Incidentally, because I did not check the facts of what I just recounted, I just did the same thing…)
You can tell a story without making up fiction. Just say you don’t know when you don’t know.
Inaccurate information is worse than no information.
The point is that humans can't in general, because we don't actually know which parts of what we "remember" are real and which parts are our brain filling in the blanks. And maybe it's the same for nonhuman intelligences too.
Often we don’t quote people and instead provide a high level description of what they said, e.g. “Harry described the problems with his car.”, where detail is omitted.
After a few months AI developers refined the process to just replicate images so they looked like a human being made them, in effect killing what was the real AI art.