My mother-in-law is on medicine and sees people in the house all night. What can we do?

Contact her doctor to have her meds changed. You know the term Sundowning, don't you?
Probably to get a good thread going, you should say more about your situation? Such as are you and your wife living with the MIL? Or is MIL in her own home with husband? or alone? (YIKES!) What meds is she on for hallucinations, depression, anxiety? Is this a dementia aging related problem, or is the MIL mentally ill to begin with?