What is “illusion”?

By what criterion do we judge something to be an illusion?

Does anything exist for the psyche that we are entitled to call illusion?

What we are pleased to call illusion may be for the psyche an extremely important life-factor, something as indispensable as oxygen for the body—a psychic actuality of overwhelming significance.

Presumably the psyche does not trouble itself about our categories of reality; for it, everything that world is real.

The investigator of the psyche must not confuse it with his consciousness, else he veils from his sight the object of his investigation.

On the contrary, to recognize it at all, he must learn to see how different it is from consciousness.

Nothing is more probable than that what we call illusion is very real for the psyche—for which reason we cannot take psychic reality to be commensurable with conscious reality. ~Carl Jung, CW 16, Para 111