I think the terminology is purposely being used to obscure the actual problem from the mainstream. It's not hallucinating. It's not a hallucination. It's just wrong. It's just spitting out incorrect info despite having the means to answer correctly. If my calculator kept saying 5 when I asked it 2+2, that isn't hallucinating, it's wrong. They don't want the word "wrong" associated with the AI. The strategy is working, people who just see these headlines don't think to themselves, "the AI is wrong 30% of the time, maybe I shouldn't use it for anything that matters".

Anybody who has worked in business or politics knows how word choice affects everything. This word has been picked to make people feel like it's harmless and maybe even fun, instead of the actual problem it is. This forum is filled with people who already know this stuff, but my job isn't. My family isn't. The Internet isn't. The world certainly isn't.