We investigated a 27-year old patient with paranoid schizophrenia. Brain activity related to visual hallucinations was found in higher visual areas corresponding to the content of the hallucinations (faces, bodies, scenes) and the hippocampus. We assume that the hippocampal activity is related to the retrieval of visual images from memory and that sensory cortex activity is related to the vividness of the perceptual experience.
Oertel, V., Rotarska-Jagiela, A., van de Ven, V. G., Haenschel, C., Maurer, K., & Linden, D. E. (2007). Visual hallucinations in schizophrenia investigated with functional magnetic resonance imaging. Psychiatry Research, 156(3), 269-73. https://doi.org/10.1016/j.pscychresns.2007.09.004