Lossy image compression creates artifacts, which are in a way of form of falsely reconstructed information - information which wasn't there in the original image. Lossless compression algorithms work by reducing redundancy, but don't create information where it wasn't there (thus being very different from super-resolution algorithms).
Not if it’s written text and you are selecting between 26 different letters. It’s a probabilistic reconstruction, but that’s very different to a hallucination.
