Most dreams happen during the REM stage of sleep.
The main difference between dreams and hallucinations is that dreams are an experience of thoughts or images that happens while we're asleep, and hallucinations take place while we're awake. Another key distinction is that dreams are generally viewed as a normal and healthy way to process the events of waking life, but hallucinations are in most cases a sign of mental illness, or excessive substance use.
Dreams
Dreams are the images and mini-dramas that play out in the theater of our minds while we sleep. Scientists have found numerous physical and psychological benefits to the phenomena of dreaming. The emotions we experience while we dream can be a way of lessening the stressful emotions we face in waking life. In fact, heightened brain activity during the REM -- rapid eye movement -- stage of sleep that's associated with dreaming can help the part of the brain that stores memory. Sometimes dreams show us recurring themes and symbols that, when interpreted, can help us address problems in our waking life.
Hallucinations
Hallucinations occur when a person sees, hears or feels something that isn't there while he's awake and fully conscious. Hallucinations usually happen as a result of substance use or mental illness, although they can sometimes be caused by physical problems such as excessive fever or kidney or liver failure. In addition, a person who is grieving the loss of a loved one may briefly imagine that he has seen or heard the deceased person's presence.
Similarities
Dreams and hallucinations are similar in that both involve experiencing an image or sensation that isn't present in concrete reality. Dreams and hallucinations are considered altered states of consciousness -- an experience that involves being out of touch with normal, waking three-dimensional life.
Differences
A dream can have a narrative structure that's similar to a movie, whereas a hallucination is usually a single image or sensation. Healthy people regularly have dreams; hallucinations are usually the result of mental illness, drug use or perhaps extreme illness. Though dreams can be a healthy way to process problems and emotions, a person who experiences hallucinations should see a doctor. Hallucinations can be a sign of a serious medical issue; people who experience them should not be left alone.
Tags: mental illness, waking life, Dreams hallucinations, healthy process, image sensation, stage sleep, that dreams