From Scientific American, this is an excerpt from a new book by Penelope Lewis, The Secret World of Sleep: The Surprising Science of the Mind at Rest. I'm not convinced based on this short section that there is anything new in the book, but it seems worth sharing nonetheless.

What Is Dreaming and What Does It Tell Us about Memory?

Dreams may play a role in memory incorporation and influence our long-term moods, physiology and creativity

Jul 18, 2014 | By Penelope A. Lewis

Excerpted with permission from The Secret World of Sleep: The Surprising Science of the Mind at Rest, by Penelope A. Lewis. Available from Palgrave Macmillan Trade. Copyright © 2013. (Scientific American and Palgrave Macmillan are part of the Holtzbrinck Publishing Group.)

You are terrified and running along a dark, narrow corridor. Something very evil and scary is chasing you, but you’re not sure why. Your fear is compounded by the fact that your feet won’t do what you want—it feels like they are moving through molasses. The pursuer is gaining, but when it finally catches you, the whole scene vanishes...and you wake up.

Almost by definition, a dream is something you are aware of at some level. It may be fragmentary, disconnected, and illogical, but if you aren’t aware of it during sleep then it isn’t a dream. Many people will protest, “I never remember my dreams!,” but that is a different matter entirely. Failing to remember a dream later on when you’re awake doesn’t mean you weren’t aware of it when it occurred. It just means the experience was never really carved into your memory, has decayed in storage, or isn’t accessible for easy call back.

We all intuitively know what a dream is, but you’ll be surprised to learn there’s no universally accepted definition of dreaming. One fairly safe catch-all is “all perceptions, thoughts, or emotions experienced during sleep.” Because this is very broad, there are also several different ways of rating, ranking, and scoring dreams. For example, one uses an eight-point rating system from 0 (no dream) to 7 (“an extremely long sequence of 5 or more stages”).

Physical Bases of Dreams

But let me backtrack. One aim of neuroscience is to map the brain loci of thoughts and mental experiences. Everything we see, imagine, or think about is linked to neural responses somewhere in the brain. Dreams also have a home. Neural activity in the primary sensory areas of the neocortex produces the impression of sensory perception. This means that neurons firing in the primary visual cortex create the illusion of seeing things, neurons firing in the primary auditory area create the illusion of hearing things, and so forth. If that firing occurs at random, these perceptions can feel like crazy, randomly fragmented hallucinations. It is easy to imagine that the random imagery and sensations created in this way could be woven together to create a complex, multisensory hallucination which we might call a dream.

Do Dreams Serve a Purpose?

In contrast to an activation-synthesis model, which views dreams as epiphenomena—a simple by-product of neural processes in sleep—other scientists have suggested that dreams serve an important function. As usual in psychology, there are lots of different ideas about what this function could be. Sigmund Freud’s suggestion that dreams express forbidden desires is of course the most famous of these, but there are lots of other theories about what dreams might do, many with more empirical support than the Freudian view. For example, the threat simulation hypothesis suggests that dreams may provide a sort of virtual reality simulation in which we can rehearse threatening situations, even if we don’t remember the dreams. Presumably, this rehearsal would lead to better real-life responses, so the rehearsal is adaptive. Evidence supporting this comes from the large proportion of dreams which include a threatening situation (more than 70 percent in some studies) and the fact that this percentage is much higher than the incidence of threats in the dreamer’s actual daytime life. Furthermore, studies of children in two different areas of Palestine show that those who live in a more threatening environment also have a much higher incidence of threat in their dreams. Reactions to these threats are almost always relevant and sensible, so the rehearsal (if that’s what it is) clearly involves plausible solutions, again suggesting that they provide a kind of valid simulation of potential real-life scenarios.

Another suggestion is that dreams influence the way you feel the next day, either in terms of mood or more basic bodily states. Forcing people to remember the nastier dreams from their REM sleep definitely puts them in a foul mood, and nightmares (defined as very negative dreams which can wake you up) may even lead to ongoing mood problems. On the other hand, there is also evidence that dreams could help to regulate long-term mood. For instance, a study of dreams in divorced women showed that those who dreamed about their ex-husbands more often were better adapted to the divorce. Amazingly enough, dreams also seem able to influence physiological state: One study showed that people who were deprived of water before they slept, but then drank in their dreams, felt less thirsty when they woke up.

The content of dreams can be influenced in lots of different ways. For instance, recent work has shown that sleepers tend to initiate pleasant dreams if nice smells are wafted at them in REM sleep, and they have negative or unhappy dreams if stinky, unpleasant smells are sent their way. Some people can achieve lucid dreaming, in which they control the sequence of events in their dream, and evidence suggests that these techniques can be learned by intensive practice and training. All of this is highly tantalizing, of course, because (though it tells us nothing at all about the original evolved purpose of dreams) it suggests we might not only be able to set ourselves up for pleasant experiences while we sleep, but we might also eventually be able to use these techniques to treat mood disorders, phobias, and other psychological problems. We already know that hypnotic suggestion can cause people to incorporate snakes, spiders, or other things about which they have phobias into their dreams, and—when combined with more benign forms of these menacing objects—such incorporation helps to remove the phobia. Hypnotic suggestion can also make dreams more pleasant, and mental imagery practiced during the day can be used to modify (and often nullify) persistent nightmares.

There is little evidence that people actually learn during their dreams. The fact that they can learn during sleep is a different matter, but dreams themselves don’t appear to be a good forum for imprinting new information into the hippocampus (after all, we don’t even remember our dreams most of the time). Studies of language learning illustrate this well. Although learning efficiency is predicted by an increase in the percentage of the night that is spent in REM, the dreams which are experienced during this extra REM don’t have much to do with language. If they relate to it at all they are most often about the frustration of not being able to understand something and not about the mechanics of how to construct or decode a sentence.

Memories in Dreams

What’s the most recent dream you can remember? Was anyone you know in it? Did it happen in a place you know well? Were you doing something familiar? Most dreams incorporate fragments of experiences from our waking lives. It’s common to dream about disconnected snippets like a particular person, place, or activity. But do dreams ever replay complete memories—for instance, the last time you saw your mother, including the place, activities, and people? Memories like this are called episodic because they represent whole episodes instead of just fragments; studies the secret world of sleep of dreaming show that these types of memories are sometimes replayed in sleep, but it is quite rare (around 2 percent of dreams contain such memories, according to one study). Most of our dreams just recombine fragments of waking life. These fragments are relatively familiar and reflect the interests and concerns of the dreamer. This means cyclists dream about cycling, teachers dream about teaching, and bankers dream about money.

Some researchers have capitalized upon dream reports to gain insight into the process by which memories are immediately incorporated (i.e., in the first night after they were initially experienced). Freud famously referred to this as “day-residues.” One study showed day residues appear in 65 to 70 percent of single dream reports. On the other hand, a more recently described phenomenon called the dream-lag effect refers to the extraordinary observation that, after its initial appearance as a day residue, the likelihood that a specific memory will be incorporated into dreams decreases steadily across the next few nights after the memory was formed, then increases again across the following few nights (Fig. 20).

Thus, it is very common for memories to be incorporated into dreams on the first night after they were initially experienced (if I have a car crash today, I’m likely to dream about it tonight). The likelihood of such incorporation decreases gradually across the next few nights, with few memories incorporated into dreams three to five days after they occurred. Extraordinarily, however, the probability that a memory will be incorporated into a dream increases again on nights six and seven after it was initially experienced. What is going on here? Why are memories less likely to be incorporated into dreams three to five days after they originally occurred than six to seven days afterward? One possibility relates to the need for consolidation. Memories may be inaccessible at this stage because they are being processed in some way which takes them temporarily “offline.” Notably, this effect is only true for people who report vivid dreams, and it also appears to only be true of REM dreams. As with most research, the dream-lag effect raises more questions than it answers.

Why Do We Have Different Kinds of Dreams at Different Stages of the Night?

Dreams aren’t all the same. Everyone is aware of the difference between good and bad dreams, but we don’t tend to notice that some dreams are more logical and structured while others are more bizarre. Some dreams are so highly realistic that it is difficult to convince ourselves they aren’t real, while others are fuzzy and indistinct. Some dreams are fragmented, jumping rapidly from one topic to another, while others move forward in a more coherent story. Recent analyses have suggested that these differences are far from random; instead they may be driven by the physiology of various brain states and the extent to which structures like the hippocampus and neocortex are in communication during different sleep stages.

Dreams occur in all stages of sleep, but they seem to become increasingly fragmented as the night progresses. In general, they appear to be constructed out of a mishmash of prior experience. As mentioned above, dreams contain disconnected memory fragments: places we’ve been, faces we’ve seen, situations that are partly familiar. These fragments can either be pasted together in a semi-random mess or organized in a structured and realistic way. The dreams that occur in non-REM sleep tend to be shorter but more cohesive than REM dreams, and often they relate to things that just happened the day before. REM dreams that occur early in the night often also reflect recent waking experiences, but they are more fragmented than their non-REM counterparts. Conversely, REM dreams that occur late in the night are typically much more bizarre and disjointed.

Simply thinking about where these memory fragments are coming from and how they are connected together may provide an explanation for the difference between early and late-night dreams. The various elements of an episode are thought to be stored in the neocortex, but they are not necessarily linked together to form a complete representation. For example, if your memory of having dinner last night involves memories about a specific place, specific sounds, specific actions, and maybe even memories about other people who were there, each of these bits of information is represented by a different area of the neocortex. Even though they combine together to make up a complete memory, these various neocortical areas may not be directly interlinked. Instead, the hippocampus keeps track of such connections and forms the appropriate linkages, at least while the memory is relatively fresh. However, communication between the neocortex and hippocampus is disrupted during sleep, so this process is also disrupted. During REM sleep, both the hippocampus and those parts of the neocortex which are involved in a current dream are strongly active—but they don’t appear to be in communication. Instead, responses in the neocortex occur independently, without hippocampal input, so they must relate to memory fragments rather than linked multisensory representations. Essentially, when memories which have been stored in the neocortex are accessed or activated during REM, they remain fragmentary instead of drawing in other aspects of the same memory to form a complete episodic replay. These fragments aren’t linked together in the way they might be if you thought of the same place while you were awake (or indeed in non-REM sleep). For instance, cortical representations of both someone who was present for your dinner last night and of the place where it was held may be triggered, but these will not necessarily be linked together, and they may not be linked to the idea of dinner or eating at all. Instead, seemingly unrelated characters and events may be activated in conjunction with the memory of this place. One possible driver for this is the stress hormone cortisol, which increases steadily across the night. High cortisol concentrations can block communication between the hippocampus and neocortex, and since concentrations are much higher early in the morning, this could provide a physiological reason for the disjointed properties of late-night (early morning) dreams.

Irrespective of how it happens, it is clear that dreams not only replay memory fragments but also create brand-new, highly creative mixtures of memories and knowledge. This process has led to the creation of many works of literature, art, and science, such as Mary Shelley’s Frankenstein, the molecular formula of benzene, and the invention of the light bulb. An especially good demonstration of this somnolent creativity comes from a study of 35 professional musicians who not only heard more music in their dreams than your normal man-on-the-street but also reported that much of this (28 percent) was music they had never heard in waking life. They had created new music in their dreams!

Although we don’t quite understand how dreams achieve this type of innovative recombination of material, it seems clear that the sleeping brain is somehow freed of constraints and can thus create whole sequences of free associations. This is not only useful for creativity, it is also thought to facilitate insight and problem solving. It may even be critical for the integration of newly acquired memories with more remote ones (see chapter 8). In fact, this facilitated lateral thinking could, in itself, be the true purpose of dreams. It is certainly valuable enough to have evolved through natural selection.