http://www.wired.com/wiredscience/2009/04/schizoillusion/The relationship to their hallucinations are speculative, but the basic idea is that their brains may not be bothered by the implausibility of a concave face (or, perhaps, of their own delusions/hallucinations). People without schizophrenia have high expectations for realism, so they can’t imagine something so fantastic as a concave face...
Interesting connections here between creativity, schizophrenia, and altered states of mind induced by drugs or sleep deprivation.