I think dreams are our mind at work filing away experiences, both in what will become memory we are conscious of and that which we will no longer have conscious access to - which is why we have to do it while asleep, for to allow our conscious "self" while awake to dig into the compost heap of our unconscious would be very painful!
The process of memory and association, in a way similar to other autonomous functions like keeping a heart beating and kidneys working, is far too complicated for a fairly thick skulled ape to manage on its own, while trying to survive in the nasty world of saber tooth tigers and hostile takeovers. So, as our brain evolved to its current swollen, complex state, it also evolved mechanisms for assessing and filing the huge amount of sensation that gets fed into it every day.
It waits until the owner is no longer in need of their filing clerk (this clerk is busy all day summoning up things like the recipe for toast, where you left your coffee mug, and which berries are poisonous), and then takes over the office. Piles of information of various importance are piled up all over the place! Many have little notes attached, aiding in determining this relative importance. These notes say things like "this was fun," or "wow!" or "I hope I never have to do this again," and other, more interesting things I can't even begin to think of because I've been writing too much in the last few days.
Basically these tags are attached during our day according to the intensity of an experience, which is the same means by which we focus our attention. Vast quantities of them are so faded and weak as to pretty much already be thrown out - the things we were not paying the least bit of attention to. Others are boldly written in brightly colored crayons, so as to require careful cross referencing while filing.
So our little filing clerk scurries about, making new connections between memories and thoughts, reinforcing old ones, weakening ones that never seem to get used in order to use their pathways for other, more pressing issues.
Now, it is the case that this clerk has access to things we cannot get to on our own, while awake. The boundary between the conscious and the unconscious part of our mind is invisible, as it were, at this time. This is because the only reason for the unconscious' existence is to store that which is labelled IMPORTANT but AWFUL, or UNPROCESSABLE as well. Even the intense positive experiences require partial burial - I think this is because it is more efficient to have a quick emotional response leading to pleasant behaviour than to have to think it through - evolutionarily speaking, of course.
In addition to the barrier between the conscious and unconscious mind being temporarily reduced, to ease in our daytime recovery from this "experience," the chemicals that allow the storage of sensation in long term memory are suppressed. Short term memory is what the filing clerk uses to move things around, but long term memories of this process would cause great suffering as the contents of the unconscious would be part of them.
The funny part is, that while we are "dreaming," we drift in and out of our sleepy state, much as if under the influence of not quite enough anesthetic. Also, we are sometimes awoken, either by the intensity of a dream, or by something in our environment.
This latter interupts the clerk at their work - and in a brief moment between sleep and arousal, we have in our mind (or brain) the contents of whatever was being stored, and all the strange, irrational little connections that were being made in order to make easy (or difficult) the accessing of it in the future. This is why dreams (that we remember) are so weird. By the way, the best way to remember a dream beyond its fading effect on our freshly awoken mind is to keep thinking about it. As we come to, our long term memory process are reactivated, but it takes a moment or two, even up to few minutes. By thinking the dream through, we keep it in our mind until it gets stored in long term memory and we can ge to it again, later. Practice will tell you how long to do this for - and also, since you are trying to form long term memories immediately upon waking, your brain will learn to remember these things more effectively and sooner, making it easier.
The former, the "not quite out cold" form of sleep, is an odd one. It is highly unlikely that we will remember this sort of dreaming (unless we are interupted and remember it as described above), but amusingly enough some aspect of ourself which resembles waking consciousness is participating, or at least observing, the process. This can lead to "lucid dreaming," where our will acts in forming the pathways and connections that are made (also known as "recreational dreaming"...!), and other complex interactions between what we think of as our waking self and the things that are sometimes stored deeply within our unconscious. Like nightmares, from which we often struggle mightily to awake ourselves in order to escape them.
Now it pays to remember that this filing process is a two way street - while some things from our conscious states are being virtually permanently sealed away in our unconscious, some things encountered during this process will be brought forward, as it were, into the light of our conscious ability to remember them. These are unlikely to take the form of straightforward, exact memories, and more likely to be subtle associations of feeling and activity, or weird mismatched handfuls of old memory, which we now have awareness of.
© Huw Powell