In the context of Generative AI$,$ what do hallucinations refer to$?$

In the context of Generative AI$,$ what do hallucinations refer to$?$

Fictitious outputs that appear plausible and coherent but are actually inaccurate.

Virtual reality experiences created by AI to immerse users in digital environments.

AI$-$generated insights that correct for bias in the training data and accurately reflect reality

AI models that specialize in medical image analysis, aiding doctors in diagnosis and treatment.