Charles Bonnet Syndrome is a neurological disorder affecting people with damage in their visual pathway -- damage to their eye, optic nerve, or visual cortex. People with this syndrome have complex visual hallucinations that take place in the affected part of their visual field. It is very common, occurring in approximately one out of ten people with partial or complete blindness. Some studies have found it to be even more common in geriatric populations with visual problems.
There is a wide variation in these visions. Some people report intricate patterns and designs, others report seeing people, living or dead. Some see approximately what they would expect to see -- if looking at a field, their blind spot may be populated with cows, or if looking for an object they may see what they are looking for. (One man with a large blind spot over the lower half of his visual field reported that sometimes when looking for his shoes he would see hundreds of shoes all over the floor, making it impossible to find the real pair). One woman reported that she constantly saw cartoon characters climbing on the curtains or sitting in people's laps. Others report seeing complex and often surreal events with multiple actors in complex scenes.
"Mine have included a blue Hoover, golden sparks, melting purple blobs, a skein of spit, a dancing brown spot, snowflakes, saffron and light blue waves, and two eight balls, to say nothing of the corona, which used to halo street lamps and is now brilliantly discernible when a shaft of light breaks against a crystal bowl or a bright metal edge. This corona, usually triple, is like a chrysanthemum composed of thousands of radiating petals, each ten times as slender and each containing in order the colors of the prism. Man has devised no spectacle of light in any way similar to this sublime arrangement of colors or holy visitation."
--James Thurber in a letter to his ophthalmologist; he went blind in his later life, and saw frequent hallucinations of many sorts.
Of course, the most popularized accounts are also the most extreme. The frequency and form of these hallucinations is highly varied. Some people report seeing hallucinations only once or twice a year, while others see them constantly. Some are clearly imaginary and easily dismissed, while others are very real -- or so infrequent that the person is not expecting a hallucination, and mistakes even extraordinary visions for real.
It is very common for people to hide the fact that they are seeing these hallucinations, as we tend to associate such things with senility and insanity, but in this case the hallucinations are purely a neurological oddity, as the brain tries to fill in missing spots in its visual processing. They do not directly indicate anything negative about a person's psychological state or stability. While it is not always immediately obvious that these visions are hallucinations, most mentally sound people will quickly recognize that they are not real; believing that there really is a monkey sitting at the foot of your bed would be an indication of an accompanying mental issue.
It is worth noting that in many cultures, including large segments of the American population, it is socially acceptable to believe that these hallucinations are real if they are attributed to a supernatural or religious source -- seeing ghosts or holy visions does not automatically put you in the insane category, nor would some people consider these to be signs that something is wrong neurologically or psychologically.
The blank spot in a person's visual field is known as a scotoma; Charles Bonnet Syndrome generally affects only the scotoma, or, if blind, the entire visual field. Because blind spots move as the eyes and head move, hallucinations may 'seep' into the regularly functioning visual field, and it can be hard to distinguish what is real. The hallucinations are also often very lifelike, and may be appropriate to the surroundings and situations, making it even harder to detect them.
Treatment is usually limited to management, although in serious cases some relief can be found through the use of antidepressants and anticonvulsants. In most cases patients are able to deal with, and in some cases even enjoy, the hallucinations -- once they are assured that they are not a sign of insanity or senility. Unfortunately, many caregivers and doctors are more than willing to assume that any references to visions are a sign of confusion, perhaps as a precursor to senile dementia.
Charles Bonnet Syndrome is named after its discoverer, Charles Bonnet, who is also known for the discovery of parthenogenesis and the doctrine of preformationism. He first described it in 1760 after his grandfather began to have hallucinations of people and animals that would grow and shrink as he looked at them, along with carriages and buildings and patterns.
References:
Phantoms in the Brain by V.S. Ramachandran & Sandra Blakeslee
Charles Bonnet syndrome, management with simple behavioral technique by Baba Awoye Issa and Abdullahi Dasliva Yussuf.
Wikipedia: Charles Bonnet
Various neuroanatomy, physiology, and anthropology classes.