My DS2 has been the one to do this, the other two never did. My Aunty used to laugh at the 'faeries' he was talking to/seeing but I always thought it was a member of my family, mostly DS' great grandparents.

At first it freaked me in the middle of the night but then I just started thinking of it as comforting, like I had someone else there awake in the wee hours with me