Waterlogged blocks and flowing lava can touch without converting to stone. This commonly happens in stone generators when the lava flows to the conversion spot before the water.

To reproduce build whats in the first screenshot (without the observers), let the lava flow down, fill the dispenser with a bucket of water, then flick the lever. The intended mechanic is the flowing lava would become cobblestone, but it doesn't.

It's a very niche bug that seems inconsequential, but it has a large effect on stone/basalt hybrid generators. As seen in the second screenshot, this bug decreases the stone generation, compared to basalt, by about 80%.