Der Junge sagte, das Taxi habe sich im Nebel aufgelöst.

I’m having trouble with this word in its usage here, and understanding the logic behind it. As an adjective, “aufgelöst” is often translated “hysterical”, like if someone is extremely upset, and this meaning is more intuitive to me.

As a verb, I see “auflösen” is also used to mean “dissolve”, “cancel”, “disperse”, and “dissipate”, again, which are more intuitive. I guess it’s just an idiomatic thing that you can use this word in this context too? It’s sort of describing what happens to the Taxi visually as it disappears into the fog?