Dreams are both internal and external. Since the ego or the director is absent during sleep the neural pathways have a run of  their own. thus the day long experiences or the existing memories are the driving force for the internal dreams. However when there is tremendous thinking activity or Sanyam on a particular thought during  waking time, it leads sometimes on solution dreams. Various great inventions and discoveries of the world have come through such dreaming process. Why we do not remember dreams has been researched by lots of brain scientists and there are many reasons - part of it is to do with creation long term memory. Nevertheless it is the dreams that we member that make life interesting. There are many theories of dreams but we still do not know why we dream and why most of the time we have random and strange dreams. A possible answer may lie in how synapses behave during sleep. 
The more we dream during the night the less restful is the sleep. A really restful sleep is deep sleep without dreams. This helps in the flushing out of the toxic material  from major part of the brain. Besides removing the toxins from the brain the increase of synaptic cleft may also help in explaining the dreaming process.
What are dreams?