What are dreams for? It seems to me the overlooked function of dreams is to keep us asleep. A rested body I imagine has survival value, and an absorbing story can divert attention away from possible outside and even internal distractions that might cause us to wake ourselves up. (This could also be a reason we don't remember all our dreams. They served their function in sleep.)
Dreams tell us stories. They can be weird stories, with the gaps in easily followed narrative logic of the stories spun by a young child, leaping around through time and space, with characters that appear and disappear, transform and wander away, with no obvious beginning or end, not to mention a middle. But they are stories, and often have the power to evoke powerful emotions within the sleeping state, some of which are stronger than those we usually can access awake.
Which suggests the question: which came first? The dream story or the waking story? Stories are a way to structure information. It's generally suspected that their function in life in the world is that they organize memories and help us remember things it is useful or even vital to remember. A good story makes things vivid. Or the way it is told (in song for instance) is catchy. If the story is about a place where a dangerous predator hangs out, or where there's a source of water, we're more likely to remember it and benefit thereby.
But was this way of structuring information suggested first by dreams? If so, how did the brain become a storyteller? It could be that in the interest of keeping us asleep, it invented the story. Then the story migrated to daydreams and then to an entertaining way of bragging about a successful hunt.
Another function of story, as athletes in particular use, is as an imaginative rehearsal. Through the story you tell yourself, consciously or in a daydream or even a night dream, you imagine situations and what you do. These may be rehearsals for facing these situations in life. Athletes have found that the body as well as the brain learns from these rehearsals.
Of course this is all massively overdetermined--dreams likely have a number of contributing causes and functions, like stories do. And dreams probably have all kinds of effects, including psychological, symbolic, maybe even precognition and so on.
Some scientists believe that in dreams the brain is sorting through information gathered in the past--the previous day, or in childhood---and using it for stories. It may also be a way of bringing perceptions that never quite made it into consciousness or awareness beyond the momentary that got sorted into the background, into awareness.
But why don't we always remember the information in dreams? Why are dreams often such weird stories? There may be good reasons we don't understand. But then again, maybe dreams are stories that haven't quite gotten their act together.
One reason we don't remember much, or why dreams are so weird (and sometimes wake us up instead of keeping us asleep) could be that dreaming as a brain function is a work in progress. Unlike, say, vision, the brain hasn't yet coordinated such a complicated process to work smoothly, all the time. The very complicated human organism hasn't worked out the kinks. Maybe in a few million years, though.
