Here's a thought experiment, offered by Antonio Zadra, for those of you who feel that dreams are simply a figment of your imagination.
"Imagine a second version of yourself walking up a set of stairs," he says. "Now, imagine that second you imagining a third you. It doesn't work very well."
"But when you're dreaming, the second you in the dream can imagine a third you, or a crowd of people, or a whole world, for that matter."
Another interesting thought: "You can imagine yourself falling off a cliff," says Zadra, "but you don't really feel any fear. When you dream that you fall off a cliff, however, the fear is visceral and real."
According to Zadra, this "independent" ability of the dreaming you to fabricate and experience a realistic environment shows that dream experiences are fundamentally distinct from mere imagination.