According to Allan Hobson's "activation-synthesis" theory, dreams are a subjective interpretation of the results of brain activation during sleep.
    This theory has been presented as a major alternative to Freud's theory. Nowadays Freud's theories are regarded as being largely Freud's own speculations, and not subject by Freud or indeed any of his followers to proper scientific testing. But just because Freud is wrong it does not follow that some other particular theory is right.
    My own understanding of Hobson's theory comes from his book Sleep, published as a volume of the "Scientific American Library", and in particular Chapter 7, "Dreaming". It seems to me that his formulation of the theory comes perilously close to the following -

Dreaming occurs as a result of brain activity, altered brain states and neurochemical changes that occur during dreaming.
The problem with this formulation is that you could apply it to any other mental state, and it wouldn't particularly tell you much, other than reasserting one's faith in the materialistic hypothesis. For example -
Anger occurs as a result of brain activity, altered brain states and neurochemical changes that occur during anger.
Hobson seems to be certain that if he can show dreaming results from altered neurochemistry, then the content of dreams is not of any great significance. He suggests that there may be no possibility of explaining why a dream has one plot or another plot. He implicitly rejects the possibility that there might exist a creative force deliberately constructing the plot.
    I think that Hobson has fallen prey to the fallacy of thinking that phenomena in living organisms either have a mechanistic explanation or they have a teleological (i.e. purposeful) explanation. So if dreams result from altered neurochemistry, then there is no need to explain the processes that construct them, or to investigate the purpose that might lie behind such construction. But it is almost a defining property of life that processes in living organisms have both mechanistic and teleological explanations. We get angry because of neurochemical changes in our brain that occur during anger, but we can also observe that anger serves a purpose, which is to encourage certain types of behaviour in the types of situation that tend to give rise to anger.
    It is equally possible that when we observe neurochemical changes in the brain during dreaming, what we are observing is precisely the activation of the brain's ability to construct dreams for whatever purpose it is that they are constructed, and that the choice of plot is not just the accidental collision of random neural activation and subjective interpretation.