(p. C4) In the past, people often had one explanation for sleep and another for dreams. That now seems wrong. One of the chief functions of sleep seems to be achieved during dreaming: the consolidation of memory. Sleep certainly improves memory performance of several different kinds: emotional, spatial, procedural and verbal.
But the new thinking is that, during sleep, the brain reprocesses or transforms fragile new memories into more permanent forms, sets them in mental context and extracts their meaning. And dreaming is a symptom that this is going on.