Much of the research on visual hallucinations (VHs) has been conducted in the context of eye disease and neurodegenerative conditions, but little is known about these phenomena in psychiatric and nonclinical populations. The purpose of this article is to bring together current knowledge regarding VHs in the psychosis phenotype and contrast this data with the literature drawn from neurodegenerative disorders and eye disease. The evidence challenges the traditional views that VHs are atypical or uncommon in psychosis. The weighted mean for VHs is 27% in schizophrenia, 15% in affective psychosis, and 7.3% in the general community. VHs are linked to a more severe psychopathological profile and less favorable outcome in psychosis and neurodegenerative conditions. VHs typically co-occur with auditory hallucinations, suggesting a common etiological cause. VHs in psychosis are also remarkably complex, negative in content, and are interpreted to have personal relevance. The cognitive mechanisms of VHs in psychosis have rarely been investigated, but existing studies point to source-monitoring deficits and distortions in top-down mechanisms, although evidence for visual processing deficits, which feature strongly in the organic literature, is lacking. Brain imaging studies point to the activation of visual cortex during hallucinations on a background of structural and connectivity changes within wider brain networks. The relationship between VHs in psychosis, eye disease, and neurodegeneration remains unclear, although the pattern of similarities and differences described in this review suggests that comparative studies may have potentially important clinical and theoretical implications.