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A pseudohallucination is a vivid sensory experience but is recognised by the subject as coming from their mind. They are therefore not confusing it with an external event so it is not regarded as an hallucination, more a perceptual disturbance
An example used in psychiatry is the hearing of voices which are inside the head according to the patient; in contrast, an hallucination would be indistinguishable to the patient from a real external stimulus, e.g. people were talking about me.
The term is not widely used in the psychiatric and medical fields, as it is considered ambiguous. The term "nonpsychotic hallucination" is more preferred. Pseudohallucinations, then, are more likely to happen with an hallucinogenic drug. Thus, when one speaks of hallucinating when under the influence of such a drug (excluding deliriants), they are often referring to pseudohallucinations when the experience is open to self monitoring.