My hunch (based on my personal experiences) is that these occur in different phases of sleep.
I find that while I am falling asleep, I often have indescribable nonsense "hallucinations" (I hesitate to call them that because it makes them sound a lot more cohesive than they really are) that feel almost like random noise. These are not just sensory hallucinations, but also logical hallucinations: I have thoughts and beliefs that make so little rational sense that I don't know how to describe them.
But later on I will have complex dreams with coherent characters, plots, etc., and have an inner sense of logic (even though it is dream logic) that I can describe after I wake up.
Hallucinations and lucid dreams during falling asleep are called hypnagogia and definitely are different as they don’t involve REM. I think a lot of people don’t talk about it for fear of sounding crazy.
And for those interested In hallucinations, Oliver Sacks has an amazing book that I think also destigmatizes them and covers how different they can be from hypnagogic, to migraine, to drug induced, etc.
With regard to your “hallucinations” comment, you remind me of something the old hippies told me. I remember asking about acid flashbacks and the heavy users would say oh yes we get flashbacks and I’d ask them lots of questions, eventually I established with them that the most likely time to experience as flashback is falling asleep or waking up from an afternoon nap.
I find that while I am falling asleep, I often have indescribable nonsense "hallucinations" (I hesitate to call them that because it makes them sound a lot more cohesive than they really are) that feel almost like random noise. These are not just sensory hallucinations, but also logical hallucinations: I have thoughts and beliefs that make so little rational sense that I don't know how to describe them.
But later on I will have complex dreams with coherent characters, plots, etc., and have an inner sense of logic (even though it is dream logic) that I can describe after I wake up.