The marker causes degenerative mental effects. This causes dementia and many forms of schizophrenia in those exposed. The marker can then control the symptoms and use the hallucinations and paranoia to tailor the uninfected to create or facilitate necromorph infestation. e.g.
Sam Caldwell killed his entire crew due to hallucinations, this caused the Aegis 7 outbreak when the corpses of those he killed were infected.
in the Aegis colony about 90% of the population went mad, hundreds were killed and reanimated and after a few hours the colony (and the ishimura) went silent.
However it is interesting to note that Lexine Murdoch was the only survivor to have an ability to not be effected by the psychologically damaging effects of the marker, however she did suffer some physical trauma as a result.
So yes, the marker causes the hallucinations. Nicole is designed to lure you into traps and work towards the goal of total human infection. Alternatively it could be using Isaac's unwillingness to lose her to try and make him protect the marker so she never leaves him. Nicole also brings Isaac closer to the marker for another reason which i am not going to disclose due to spoilers.
