I haven't heard of hallucinations, but your body undergoes sleep paralysis every night, right after you hit REM sleep. This prevents your body from actually acting out your dreams. It is also said ( though I'm not sure if it's true) but if your body doesn't go into sleep paralysis that's what causes you to sleepwalk. I also heard that the hallucinations are actually your dream getting set up, and that's how you know that you are close to a lucid dream (whole other subject) Hope this helped.