That is a very good question to which Izuku has basically no answers. He's gotten to the point where he doesn't think this is a Quirk (probably. maybe. the jury is forever gonna be out on that one to a degree) but that doesn't mean he has a clearer idea on what it actually is. All he can say is that if he's hallucinating he's sure hallucinating a lot less All Might related stuff than he would otherwise figure. Though you can't pick hallucinations, probably? But he doesn't see why he would hallucinate being an octopus merman in an ocean because that has absolutely nothing to do with anything he's ever thought about ever.

So! "I - don't actually know where we are?" Izuku treads water easily enough like this, and he's happy to help keep the older man afloat as well for the time being. It doesn't take a lot of effort when he's some kind of merthing. "I was somewhere else and then I was in the water, but I could breathe it? And then I saw you, so..."