His wife suggests that a particular servant, whose reputation does not stand too high, has stolen it.

When he afterwards recalls the loss, the chances are that he will confuse the fact with the conjecture attached to it, and say he remembers that this particular servant did steal the pin.

Thus, the past activity of imagination serves to corrupt and partially falsify recollections that have a genuine basis of fact.
It is evident that this class of mnemonic illusions approximates in character to illusions of perception.

When the imagination supplies the interpretation at the very time, and the mind reads this into the perceived object, the error is one of perception.

When the addition is made afterwards, on reflecting upon the perception, the error is one of memory.