Perceptual misinterpretation of a real stimulus or object is known as:

An illusion is sensory stimulation given a false interpretation, that is, a false perception. Illusions are most likely to occur when the mind is under the sway of an emotionally determined ideational "set" (e.g., vigilance for an intruder), when sensory clarity is reduced (e.g., at night), or when both sets of circumstances are operating (as when a frightened elderly patient has both eyes bandaged following ophthalmic surgery). Illusions are common in delirium and may be visual(e.g., fluttering cuains seen as intruders), auditory(e.g., a slamming door interpreted as the repo of a pistol), tactile (e.g., skin sensations thought to be caused by vermin), gustatory (e.g., poison detected in the taste of food), kinesthetic (e.g., flying), or visceral (e.g., abdominal pain thought to be caused by ground glass). Illusions may also occur in hysteria, depression, and schizophrenia, paicularly when perception is subordinated to a delusional idea (e.g., of guilt or persecution) or an emotion of great force (e.g., abandonment or erotic yearning). Ref: Nurcombe B., Ebe M.H. (2008). Chapter 4. The Psychiatric Interview. In M.H. Ebe, P.T. Loosen, B. Nurcombe, J.F. Leckman (Eds), CURRENT Diagnosis & Treatment: Psychiatry, 2e.