(Appendix 2: Dreams)
“Q: How do these differ?
A: The nature and functions of real dreams cannot be understood unless we admit the existence of an immortal Ego in mortal man, independent of the physical body, for the subject becomes quite unintelligible unless we believe – that which is a fact – that during sleep there remains only an animated form of clay, whose powers of independent thinking are utterly paralyzed.
But if we admit the existence of a higher or permanent Ego in us – which Ego must not be confused with what we call the “Higher Self”, we can comprehend that what we often regard as dreams, generally accepted as idle fancies, are, in truth, stray pages torn out from the life and experiences of the inner man, and the dim recollection of which at the moment of awakening becomes more or less distorted by our physical memory.
The latter catches mechanically a few impressions of the thoughts, facts witnessed, and deeds performed by the inner man during its hours of complete freedom. For our Ego lives in its own separate life within its prison of clay whenever it becomes free from the trammels of matter, i.e., during the sleep of the physical man.
This Ego it is which is the actor, the real man, the true human self, But the physical man cannot feel or be conscious during dreams; for the personality, the outer man, with its brain and thinking apparatus, are paralyzed more or less completely.
We might well compare the real Ego to a prisoner, and the physical personality to the gaoler (Jailer) of his prison. If the gaoler falls asleep, the prisoner escapes, or, at least, passes outside the walls of his prison.
The gaoler is half asleep, and looks nodding all the time out of a window, through which he can catch only occasional glimpses of his prisoner, as he would a kind of shadow moving in front of it.
But what can he perceive, and what can he know of the real actions, and especially the thoughts, of his charge?”
H. P. Blavatsky
The Mark Of God: Understanding Your "I AM Presence" 