The New York Times has an article on people who experience musical hallucinations.
This form of hallucination is interesting, because they are often the only unusual experience a person will have, unlike in psychosis, where hallucinations may be part of a range of anomalous beliefs and experiences.
Patients reported hearing a wide variety of songs, among them “Don’t Cry for Me Argentina” and “Three Blind Mice.” In two-thirds of the cases, the music was religious; six people reporting hearing the hymn “Abide With Me.” Dr. Aziz believes that people tend to hear songs they have heard repeatedly or that are emotionally significant to them.
Neurologist Tim Griffiths has been brain scanning people who experience these hallucinations. He has found that similar areas of the brain are active when a person is hallucinating music, compared to when they are actually listening to music, except for an area called the primary auditory cortex. This is the area of the brain just behind the ears, and is responsible for the initial processing of sounds.
Interestingly, musical hallucinations are often triggered by deafness.
These music-processing regions may be continually looking for signals in the brain that they can interpret, Dr. Griffiths suggested. When no sound is coming from the ears, the brain may still generate occasional, random impulses that the music-processing regions interpret as sound. They then try to match these impulses to memories of music, turning a few notes into a familiar melody.
UPDATE: There’s a good piece by Carl Zimmer on musical hallucinations here.