Freud, Sigmund: DREAMS AS WISH FULFILLMENT. The most famous dream theory in psychology is that proposed by Freud in 1900. According to Freud, dreams are disguised wishes originating in the unconscious mind and reflecting id drives, usually sexual, that the superego censors. Hence, the ego, in order to satisfy the needs of the id, presents an image (manifest content) that appears to be innocent but actually symbolizes the repressed desire. Example, recurring dreams of high towers may represent the male penis which is forbidden to "good girls."
Cartwright, Rosalind: DREAMS AS PROBLEM SOLVING VEHICLES. Circa 1977, Cartwight proposed that dreams provide people with the opportunity to creatively solve problems because what we think about in dreams is not hindered by logic, realism or anxiety. To support her theory she found that people going through divorce have more lucid dreams which occur sooner in the sleep cycle, last longer and are more emotional and story like. It was also shown that persons dreaming about divorce while going through it showed better adjustment to single life.
Pavlides and Winson: Dreams as Information Processing also known as OFF-LINE THEORY (1989). These theorists contend that the cognitive process that occurs during dreaming consolidates and stores information acquired during the day thus allowing us to maintain a smaller and more efficient brain. The term Off-line is a computer phrase referring to the fact that computers need time when data are not being input but instead are being analyzed and stored into memory. According to this theory, dreaming is the time when the brain-out computer-goes off-line to somehow integrate the new information from the day with our older memories and experiences. Evidence that dreaming may indeed serve this function is shown in data suggesting that both humans and other species spend more time in REM sleep after learning difficult material.