The Frontal Cortex blog had a posting (here) on dreaming.

The narratives that seem so incomprehensible — why was I running through the airport in my underwear? — are actually careful distillations of experience, a regurgitation of all the new ideas and insights we encounter during the day.

So what did J. Lehrer find in the literature? Memory consolidation:

While we’re fast asleep, the mind is sifting through the helter-skelter of the day, trying to figure out what we need to remember and what we can afford to forget.

Learning from experience:

(Matthew) Wilson speculates that dreams are also an attempt to search for associations between seemingly unrelated experiences, which is why it’s so important for the controlling conscious self to disappear. …How can we use the lessons of today …? This suggests that the strangeness of our nighttime narratives is actually an essential feature, as our memories are remixed and reshuffled, a mash-up tape made by the mind.

And insightful creativity:

R.E.M. sleep isn’t just essential for the formation of long-term memories: it might also be an essential component of creativity… (Jan) Born argues that deep sleep and dreaming “set the stage for the emergence of insight” by allowing us to mentally represent old ideas in new ways… According to (Sara) Mednick, the dramatic improvement in creativity is due to the fact that R.E.M. “primes associative networks,” allowing us to integrate new information into our problem-solving approach.

Dreams are very useful indeed for ordinary everyday life – remembering, learning and creating.