It's "fabrication", plain and simple.

Fully agreed that "hallucination" is a bonkers word for it — sensational and melodramatic. But few people know what a confabulation is, and moreover it's an overly complex way to describe the phenomenon.

The LLM is making something up. It's a fabrication.

It's not fanciful; it's not spooky; it's mundane, as it should be.