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There are many theories about why we dream, but no one knows for sure. Some researchers say dreams have no purpose or meaning. Others say we need dreams for our mental, emotional, and physical health.
Studies have looked into the importance of dreams to our health and well-being. In one study, researchers woke people just as they were going into REM sleep. They found that those who weren’t allowed to dream had:

More tension

Anxiety

Depression

A hard time concentrating

Lack of coordination

Weight gain

A tendency to hallucinate

Many experts say dreams exist to:

Help solve problems in our lives

Incorporate memories

Process emotions

If you go to bed with a troubling thought, you may wake with a solution or at least feel better about the situation.
Some dreams may help our brains process our thoughts and the events of the day. Others may just be the result of normal brain activity and mean very little, if anything. Researchers are still trying to figure out exactly why we dream.

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https://www.psychologytoday.com/us/blog/out-the-ooze/201801/the-freudian-symbolism-in-your-dreams

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A lucid dream is one in which you know you’re dreaming. Research shows that lucid dreaming comes with a boost of activity in parts of the brain that are usually restful during sleep. Lucid dreaming is a brain state between REM sleep and being awake.
Some lucid dreamers are able to influence their dream, changing the story, so to speak. This may be a good tactic to take sometimes, especially during a nightmare, but many dream experts say it’s better to let your dreams flow naturally.

A nightmare is a bad dream. It’s common in both children and adults. Often, it happens because of:

Stress, conflict, and fear

Trauma

Emotional problems

Medication or drug use

Illness

If you have a certain nightmare over and over again, your subconscious may be trying to tell you something. Listen to it. If you can't figure out why you’re having bad dreams, talk to a mental health care provider. They may be able to help you figure out what’s causing your nightmares and give you tips to put you at ease.
Keep in mind that no matter how scary a nightmare is, it’s not real and most likely won’t happen to you in real life.

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This classic book by the famous psychoanalyst Sigmund Freud, who published this work in 1899 to stress the importance of dreams in understanding the mindset of a person. By relying on research and case studies to describe how dreams work and how to interpret them, Freud provides a comprehensive understanding of the genre that is still relevant today. While The Interpretation of Dreams may not be the easiest read, it will give you a firm foundation of knowledge on the subject.

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Famous psychologist Sigmund Freud believed that dreams are a window into our subconscious and that they reveal a person's:

Unconscious desires

Thoughts

Motivations

Freud thought dreams were a way for people to satisfy urges and desires that weren’t acceptable to society.
Just as there are different opinions about why we dream, there are different views about what dreams mean. Some experts say dreams have no connection to our real emotions or thoughts. They’re just strange stories that don't relate to normal life.
Others say our dreams may reflect our own thoughts and feelings -- our deepest desires, fears, and concerns, especially dreams that happen over and over. By interpreting our dreams, we may gain insight into our lives and ourselves. Many people say they’ve come up with their best ideas while dreaming.
Often, people report having similar dreams: They’re being chased, fall off a cliff, or show up in public naked. These types of dreams are probably caused by hidden stress or anxiety. The dreams may be similar, but experts say the meaning behind the dream is unique to each person.
Experts say not to rely on books or "dream dictionaries," which give a specific meaning for a specific dream image or symbol. The reason behind your dream is unique to you.

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Dreams are a universal human experience that can be described as a state of consciousness characterized by sensory, cognitive and emotional occurrences during sleep.
The dreamer has reduce control over the content, visual images and activation of the memory.
There is no cognitive state that has been as extensively studied and yet as frequently misunderstood as dreaming.
There are significant differences between the neuroscientific and psychoanalytic approaches to dream analysis.
Neuroscientists are interested in the structures involved in dream production, dream organization, and narratability. However, psychoanalysis concentrates on the meaning of dreams and placing them in the context of relationships in the history of the dreamer.
Reports of dreams tend to be full of emotional and vivid experiences that contain themes, concerns, dream figures, and objects that correspond closely to waking life.
These elements create a novel "reality" out of seemingly nothing, producing an experience with a lifelike timeframe and connections.

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There are several theories about why we dream. Are dreams merely part of the sleep cycle, or do they serve some other purpose?
Possible explanations include:

representing unconscious desires and wishes

interpreting random signals from the brain and body during sleep

consolidating and processing information gathered during the day

working as a form of psychotherapy

From evidence and new research methodologies, researchers have speculated that dreaming serves the following functions:

offline memory reprocessing, in which the brain consolidates learning and memory tasks and supports and records waking consciousness

preparing for possible future threats

cognitive simulation of real life experiences, as dreaming is a subsystem of the waking default network, the part of the mind active during daydreaming

helping develop cognitive capabilities

reflecting unconscious mental function in a psychoanalytic way

a unique state of consciousness that incorporates experience of the present, processing of the past, and preparation for the future

a psychological space where overwhelming, contradictory, or highly complex notions can be brought together by the dreaming ego, notions that would be unsettling while awake, serving the need for psychological balance and equilibrium

Much that remains unknown about dreams. They are by nature difficult to study in a laboratory, but technology and new research techniques may help improve our understanding of dreams.