A.   Good  question...  Many  different  theories,  nothing for  sure.
According  to  the  Freudian   school,  dreams   are   the result   of
subconscious thoughts and desires. The other extreme attributes dreams
to random "noise" in the neurons without special meaning.

My own understanding is  that dreams are  made out of many small parts
of memory  and  imagination that  get combined  to form dream imagery.
This  is  a process  that  runs both consciously   (cf. section 6) and
subconsciously. I don't know  and leave to  speculation the reason why
this is so.