A dream is a collection of thoughts, perceptions, and feelings that a person experiences while sleeping. Everyone dreams about one-fifth of the time that they are sleeping, though some people may not remember their dreams. Although a dreaming person is not usually aware of the fact that they are dreaming, lucid dreams, in which consciousness is sustained, are possible.
Before a dream actually takes place, there are different stages of sleep one goes through every night. First, there is the transition from the waking state to the sleeping state, through which we experience hypnagogia. As time passes, brain activity diminishes, and finally reaches the deep sleep state. After this stage, the person sleeping enters REM sleep, the stage in which dreams occur. During this stage, serotonin affects the way the brain processes in such a manner that our mind ignores most external sensations, and begins to create the very things we experience in a dream. Finally, our mind struggles to connect the impulses in a logical manner, and produces the dream scenario.
Since the mind uses one's own memories in order to create the dream, the dream will mostly portray reality as one knows it with slight changes, if any at all. Consequently, things one deals with daily or remarkable situations we experience while conscious can easily influece the content of our dreams. For example, the death of a close relative or friend could increase the possibility of dreaming of that person.
See full article: dream interpretation
The interpretation of dreams is an ancient art. In early cultures, dreams were usually associated with revelations by god(s), and their interpretations were usually revealed by some kind of oracle or soothsayer. In fact, many kings used to have their dreams interpreted, in hopes of finding advice and knowledge.
In modern times, that kind of dream interpretation is still present, but not as prevalent: with the advancement of science, especially the empirical advancement of psychology, dreams can be analyzed and explained. Some consider interpreting dreams for anything other than their face value to be naive or foolish.
Still, dream interpretation is not necessarily incorrect. As stated above, issues one deals with daily can easily influece what one dreams. That way, the content of ones dreams can be analysed, in order to find potential problems that have been occupying our thoughts, changing our beliefs, increasing our fears, and much more.