Dreams: Reality or Illusion?

Today in class we discussed, the issue of dreams briefly and it really got me to thinking. What are dreams exactly? Some say they're your innermost self trying to tell you something. That could be true. Why else would people get recurring dreams every night until something in their lives change. I've also heard some people say that dreams are an account of your day and the things you were thinking about before you fell asleep. Just in a weird way. If that makes sense. Whatever dreams may be and why they happen, it really gets people to thinking. Like today for instance, what if this is all a dream we live in? If so why does our dreams that we know we have seem so different from reality or what we think is reality. In my dreams, I don't get hurt, in "real life" I get hurt almost every day, due to my clumsiness. In nightmares for example, it seems to be the one thing or things that you fear the most sometimes. But when we are "awake" all kinds of scary things happen that are not necessarily our worst fears. Are all the things we experience and all the people we meet in life just thought up by our imaginations? Or are they also in our real reality and we just don't know it? These kinds of questions puzzle me and make me a little unsure about what "reality" really is, but at the same time I'm not losing sleep over it. Because maybe I'm already sleeping anyways? lol