We think of hallucinations as the domain of the insane, or the drugged, or at least those who are undergoing sensory deprivation. But the truth is that there are kinds of hallucinations that ordinary sane people can experience. Dreams are the obvious case, but there are other cases.
One of these cases is known as hypnagogic hallucinations. When nearing sleep, people may perceive shapes, patterns, and even entire scenes of representational images. These images have no emotional associations; the observer simply sees them. It is believed that many, if not most, people experience these hallucinations. I never noticed seeing any such things until I read a book that discussed them. After I was aware of their existence, I started noticing them. Most commonly, I see faces, of many different varieties and expressions. Sometimes they are happy, sometimes sad, sometimes angry, sometimes expressing subtle and interesting emotions, but usually they are fairly neutral. Sometimes they look natural, occasionally they look sculpted, as out of stone or plastic, and sometimes they look cartoonish in proportions. In addition to faces I sometimes see what appear to be multicolored textures or pieces of larger objects. These images generally last about half a second, and are generally faint in color but unmistakably separate from my imagination, especially in the case of faces. They are more numerous and stronger later at night, particularly if I have woken up in the middle of the night. They are also sometimes much stronger and more varied when I have a migraine.
Another kind of hallucination that normal people can experience are what are known as hypnopompic hallucinations. These are rarer than hypnagogic hallucinations, and usually occur just after waking up, or spontaneously for some people with narcolepsy. These hallucinations can be more complex, and can have emotional content. For an example, somebody may wake up to see a strange person by the foot of their bed and be terrified by the vision. I have never experienced anything like that, but I have noticed a number of times that I will hear a sound just when waking up; the kind of sound varies, but it often a hissing or blowing kind of sound, or a voice, or the sound of a discrete event like a banging or interaction with a physical object. It only continues for a second or two after I open my eyes before going away, and has no emotional association besides being briefly confusing. I have always interpreted this as my brain waking up unevenly; my vision is fully awake but my hearing continues to dream. It is difficult to remember such things, but I believe that the sound I heard has often been the continuation of a sound I was hearing in my dream.
Yet another kind of hallucination ordinary people are said to experience from time to time is the "phantom buzz". This is not well studied because it is a very modern phenomenon; it happens to people who customarily carry phones in their pockets. What happens is they will perceive a vibration in their pocket, but upon querying their phone, if it was even there, realize that it made no such motion. This happens more often if they are expecting a message in the near future. I have felt this occasionally, and how I have interpreted it is thusly: my phone, when it moves around in my pocket, sometimes creates a slight "squeaky" vibration from friction with the fabric, which I can sense if I am paying close attention. When I am not paying close attention and I feel this vibration, my sensory processing, which is attuned to the feeling of a vibrating phone, interprets it as such. But since I am not at that moment feeling the direct nerve inputs from my pocket area, my brain will "fill in" the rest of the sensation, just as the visual center fills in the blind spots in our eyes.
These and other hallucinatory phenomena are written about at length in the book Hallucinations, by Oliver Sacks, a renowned neurologist and writer, whose books I highly recommend.