The Dreamer

"How is it, when we dream we do all three the same time? We write, direct, and watch the film as if we've never seen it before."

So, I was watching this hour long podcast and second half  of it just made me realize like... i don't know. It was the story of a dreamer. A dreamer having a extremely interesting dream. And although radiolab can tell this story much better, I'll summarize it for you people who don't have the time (you can listen to it at http://www.radiolab.org/2007/may/07/  and can just skip to the second half which is right after 30 minutes):

A young man, the dreamer, had traveled a lot to get away from his evil father came back to realize his father had married a new wife. Neither wanted to talk to each other, but they agreed to meet on a sandy beach. They got in an argument and the dreamer killed his father in the fight. He then went home to live with a different person. No one suspected that the dreamer had killed his father. One day he saw the person he was living with go to the train station, so he followed her. The girl went to the very place the dreamer killed his father and looked for evidence.The dreamer ducked behind a bush and saw her pick up a vital piece of evidence. It might have been from shock or from something else, but she sliped and was yelling for someone to save her. Without thinking, the dreamer saved her and they stood face the face with the evidence in between them. A few days later, while the girl was out, the dreamer looked around for that piece of evidence. When he finally found the evidence, all he could this of was ,"If she had such a important piece of evidence, why hasn't she used it yet. Then, with the dreamer still holding the evidence, the girl walked back into her room. There they stood again eye to eye with the piece of evidence between them. Soon after the dreamer heard talking in the girl's room.
"What happened? A robbery!"
"No, I'm quite ashamed actually, I thought I lost something."
The very next morning the dreamer asked the girl why she was keeping the evidence when she knew everything. The girl threw her hands up and exclaimed, "Do you not understand? I love you." And then the dreamer woke up.

I don't think my dreams have ever been so ... good, but this was the dream of  a real person. The strange thing is that while we are dreaming our minds are making this story, directing it, and watching it like we hadn't ever seen it before. Now, how does that work?