When I was a behavioral psychology student, dreams were generally thought to be illusions. However, there are certain types of psychology/psychiatry that do focus on dreams as an important part of healing. In dreams, you may heal present day, or past psychological issues: it depends on what your subconcious wants to deal with right now. This may involve confronting people who have traumatized you, or seeing them receive some kind of justice that is not possible in the physical world. (I have written about the connection between justice and healing here.)
In my experience, however, dreams are way more than this since they can offer insights into problems that are not emotional in nature. For instance, if you are a mathematician who cannot resolve some math equation, the answer may present itself in a dream.
Additionally, if you believe in an immortal soul, then you may communicate with deceased loved ones, or ancestors, during dreamtime. You may also communicate with people who are still alive that you cannot connect with in-person for some reason. For example, you (or they) may want to give them some information about yourself (or themselves) that they (or you) need to know.
All in all, the immaterial dream world is a great place to get things done that you may not be able to get done in the material world.