Activation-Synthesis Hypothesis
The Activation-Synthesis Hypothesis is a neurobiological theory of dreams. First proposed by Harvard University psychiatrists John Allan Hobson and Robert McCarley in 1977, the hypothesis suggests that dreams are created by changes in neuron activity that activates the brainstem during REM sleep.
In other words, as the body and brain cycles through the day and night, the chemicals that activate the nerves of the brainstem shift and change. As they change, they trigger brain activity that activates memories that come to the surface during periods of the light REM sleep that we all experience.