The simple answer is that MacPherson's Ossian collection of poems was a hoax. It is, however, important to understand what he was doing in context. There were an emerging group of people who looked to folk tradition for inspiration for literary creations, particularly in an effort to create a national literature. Veracity was not an established tradition when it came to collecting material from people, and the discipline of folklore had yet to be invented. MacPherson had counterparts elsewhere, but it may be fair to say that none had the influence of the Ossian poems, which played a role in inspiring others to work with folk motifs.
The following is an excerpt from my Introduction to Folklore that deals with MacPherson in context:
The work of the Grimm brothers inspired counterparts throughout Europe, particularly where people strove for nationhood. The scholarly tradition of folklore collecting paralleled that of the antiquarians and the “folklore” poets. The effectiveness of each in inspiring nationalism is difficult to evaluate and does not lend itself to simple generalizations. Nevertheless, some conclusions are possible. Early folklorists clearly helped define the nations as they fought for their own sovereignty. The politicians of nations that grew from the independence movements regularly pay homage to these early custodians of the popular culture.
Historian Hans Kohn (1944) suggests that “Herder, who can be regarded as the first representative of German nationalism and of folk nationalism generally, was influenced by Rousseau’s stress upon the primitive and pre-civilized stages of human development, the national folkdom of ‘unspoiled people.’” He further asserts that “the new emphasis in Germany upon indigenous originality” was also due to a general trend in European thought. He suggests that while the Romantic-era notion of the value of local cultural roots had expression in Britain, many British publications ultimately had a greater effect in Germany. These included Samuel Richardson’s “Clarissa” (1748) and “Sir Charles Grandison” (1753), Edward Young’s “Night Thoughts” (1742), Thomas Percy’s “Reliques of Ancient English Poetry” (1765), and especially the supposed third-century Celtic literature invented by James MacPherson, including Fragments of Ancient Poetry Collected in the Highlands of Scotland, Fingal, and The Works of Ossian (1760-1773). In Germany, these British poets and authors helped inspire the idea that it was more important to study national traditions and originality rather than to consider universal standards and values.
Kohn suggests, however, that Herder was misunderstood and that his intention was not to be nationalistic. Writing in 1944 during the depths of World War II, Kohn noted that “today’s German nationalism overlooks that no eighteenth century thinker – not even Herder – regarded the reality of the folk as a natural and therefore unchangeable and unchallengeable foundation of history.” Nevertheless, the work of Herder provides an important building block for those who wished to find the justification for nationalism in the folk.
It is within this context that a few poets and antiquarians developed an interest in folk narrative. Brentano and von Arnim exploited German folk traditions as fertile ground for a new national literature. Together, they published a collection of poetry titled Des Knaben Wunderhorn (The Boy with the Wonder Horn) between 1805 and 1808. Using folk narrative, the two hoped to draw attention to the literary potential of German language and culture with Kunstmärchen, a term that can be translated as “art folktales” or more simply, “fairytales.” Von Arnim, in particular, worked with the genre of Kunstmärchen, developing it as a distinct form of literary fiction. His stories are reminiscent of those of James MacPherson, the author of a widely popular collection of allegedly ancient Scottish writings. MacPherson’s “Ossian” poems were later proven to be a hoax, but it was not before he inspired others, including Sir Walter Scott.
Can I get some context on this question?