What is AI Hallucination?

Language models generate the most likely next words based on patterns, not by looking up verified facts. When they lack the right information, they can produce confident answers that are wrong.

Businesses reduce hallucinations by grounding the AI in their own approved information (RAG), instructing it to say 'I don't know' and hand off when unsure, limiting it to approved facts like a price list, and testing with evals.

Any customer-facing AI should be designed so a wrong answer is unlikely and low-impact: sensitive topics go to a person, and important outputs are reviewed.