A classic example is an AI confidently citing a court case, study, or URL that was never created. Hallucinations are most likely when the model has no grounded source to draw on, so it fills the gap. For brands, the risk is an engine stating something inaccurate about you.
The defensive move is to make accurate, well-structured facts about your brand easy to find and corroborate, so the engine grounds its answer instead of guessing.