Newly proposed criteria for Lewy body dementia include alterations in consciousness. Lewy body dementia is also associated with a disturbance in cholinergic transmission; neocortical cholinergic deficits in this disorder are more extensive than in Alzheimer's disease and are correlated with symptoms commonly associated with delirium, such as visual hallucinations. The traditional view that derangements of the basal forebrain cholinergic system in Alzheimer's disease relate specifically to memory impairment is assessed in terms of a more general role for cortical acetylcholine in consciousness. This extends the concept that cortical acetylcholine enhances neuronal signal to noise ratio. It is suggested that muscarinic receptor activation in the cortex is involved in confining the contents of the discrete self-reported conscious "stream." In the absence of cortical acetylcholine, currently irrelevant intrinsic and sensory information, which is constantly processed in parallel at the subconscious level, enters conscious awareness. This is consistent with the ability of anti-muscarinic drugs administered medically, recreationally, or ritualistically to induce visual hallucinations and other perceptual disturbances. The hypothesis is explored through comparisons between muscarinic and nicotinic receptor psychopharmacology and between the pathology of the basal forebrain as opposed to pedunculopontine cholinergic systems in different diseases of the human brain affecting consciousness and cognition. The paradoxical effects of muscarinic receptor blockade to induce hallucinations and of REM sleep-associated cholinergic activation of the thalamus to induce dreaming may be related to the differential distribution and activity of muscarinic receptor subtypes or to the differing responses of intrinsic GABA neurons in cortex and thalamus.