Nobody really knows yet. However, one theory is that the brain uses that time to sort and file the day's memories. It has been shown that sleep helps you learn: people who have slept after a lesson can recall it better than people who have not, suggesting that the learning has now been "properly filed" instead of "sitting in the in-tray". This hypothesis might explain dreams as memories from the day being re-seen as they are moved from temporary to permanent storage.