I looked in to this about 26 years ago. From what I could tell, nightmares were simply a mechanical way for the brain to sweep garbage data out the back door as it filed info into longer term memory. Have there been more discoveries since that time?

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Having some dev experience, I understand how throwing different bits of brief unrelated information together from the last few days could create some very gripping dreams. (I almost typed "interesting" instead of "gripping". But I just dispise the overuse of "interesting" so much!)