Rodolfo Llinás and his collegues at New York University, comparing the electrophysiological properties of the brain in waking and dreaming, postulate a single fundamental mechanism for both — a ceaseless inner talking between cerebral cortex and thalamus, a ceaseless interplay of image and feeling, irrespective of whether there is sensory input or not. When there is sensory input, this interplay integrates it to generate waking consciousness, but in the absence of sensory input it continues to generate brain states we call fantasy, hallucination, or dreams.
Thus waking consciousness is dreaming — but dreaming constrained by external reality.

An Anthropologist on Mars, footnote, Oliver Sacks, Vintage Books New York, 1995