Welcome from me too.
My mother in law ended up in hospital after falling at home and when we visited her she was clearly suffering from delusions. She did recognise us but called me closer and whispered that the woman in the bed opposite was actually a giant.....pigeon, and she was convinced that the staff were running a betting shop behind the adjoining wall and the TV cameras had been in the ward to film the horse-racing from the windows, despite it overlooking the car park.
We never really got an answer to what that was all about, other than reassurances on here that it happens sometimes in hospital, but she was diagnosed with small vessel disease and probably early vascular dementia, so in her case, I feel it was probably stroke related. That might well be why she fell in the first place.
The delusions went, although the memory of them stayed with her for some time afterwards, but she never quite appreciated how irrational her stories sounded, so I guess in her mind they were true. She does come out with unlikely 'historical' stories now as she's getting more confused as her vas dementia progresses, but that seems different to the delusions in hospital, which seemed to taking place in the present.
Fingers crossed your dad will start to improve in due course and that what he is 'seeing' is not too upsetting for him.