One of the greatest questions about LSD is whether or not it causes hallucinations. While this may seem to be like asking whether rain causes things to be wet, it is not as simple as all that.
The consensus amongst The Merck Manual, alt.drugs.psychedelics and people I have talked to, is that LSD very rarely causes actual hallucinations. While the hallmarks of an acid trip include distortions of space and time, bright colors, and the feeling that inanimate things are moving; actual full on visuals of things that are not there is fairly rare for people who have taken LSD. A rough estimate that I was given on usenet is that less then 5% of LSD trips involve such appearences.
As for what caused LSD, when it was first became popular in the 60's, to be popularly known as a drug that caused hallucinations, the answer may lie in a good amount of media hysteria surrounding it, or in the fact that doses of the drug were much higher at the time, up to 100 micrograms per tab. In any case, unless someone is already mentally ill, or they are taking a lot of very strong, pure LSD, the chances that they will see full visuals of non-existent things is, supposedly, very slim.