[He finally sits up, and it's probably obvious that he looks smug even in the darkness, his voice practically dripping with it. It's not often that he gets to have one up on Mycroft, so he'll enjoy it while it lasts.]

Yes, Mycroft, that is generally the definition of hallucination. An auditory or visual occurrence experienced as if it were there, that is not there. You seeing it does not make it any more real.