My 86 yr old father has recently started talking to himself or someone he thinks is there. Is this a sign of Alzheimers?

My aunt did not have Alzheimer's, yet she had occasional hallucinations.  Music coming from the walls, a man in her bed, etc.  Usually UTI and/or dehydration, but other reasons are possible, as 97yroldmom said.

Dad had them seeing relatives a few months before he died, as did my mother.
Doc might be able to determine cause.

Many things can cause hallucinations.
Mental illness, hospital psychosis, Parkinson’s with Lewy Body Dementia, low sodium, UTI, dehydration, New medications or over medicated. Alcoholism.
Some hallucinations appear to be helpful, kind voices. Others are harmful. There are many types.
Does he appear to both see and hear something you don’t? Or is he hearing voices or music and not seeing anything? This is considered auditory hallucinations.

If this is out of the blue, I would have him checked for a UTI. Simple pee test and an antibiotic will clear it. Left untreated UTIs can be toxic.

What else is going on with your dad? That might give you a clue. Stress, loss of sleep, poor appetite, not drinking enough water, a recent fall are some things that come to mind.

Hallucinations are not uncommon it occurs to me as I have personally known half a dozen people who have experienced them for various reasons.