The reason water is a popular mirage in hot, flat areas is because the cold air in the atmosphere sinks down below the hot air, then gets quickly heated by the ground and begins to rise. To rise, it has to push its way past more sinking cold air, so there is a constant rippling of hot and cold air at ground level. The difference in refractive index (how much something bends light) between the hot and cold air is big enough to create a visible pulsing effect that kind of looks like a lake. I hope I explained that right.
According to a TV show that was on a while ago, dehydration, hunger and fatigue can all cause hallucination, although I don't know if the apparitions seen are linked to your desires (log fire) or just random stuff.