The way I've come to understand it is that LLMs are intelligent in the same way your subconscious is intelligent.
It works off of kneejerk "this feels right" logic, that's why images look like dreams, realistic until you examine further.
We all have a kneejerk responses to situations and questions, but the difference is we filter that through our conscious mind, to apply long-term thinking and our own choices into the mix.
LLMs just keep getting better at the "this feels right" stage, which is why completely novel or niche situations can still trip it up; because it hasn't developed enough "reflexes" for that problem yet.