The word 'dreams' and its singular version occur the most times in the book of Genesis (33 total occurrences) followed by the book of Daniel (27 times) in the King James Bible. Both words occur only eight times in the entire New Testament. Interestingly, the only two people Scripture states were blessed with the ability to correctly interpret this phenomena were Joseph (Genesis 40:12, 13, 18, 19, 41:25 - 32) and Daniel (Daniel 2:16 - 23, 28 - 30, 4).
Dreams occur when a person sleeps while visions usually happen during waking hours. Scripture, however, is sometimes not fully clear whether God is communicating with someone via a dream or a vision. For example, Daniel 2:19 states that a secret was revealed to the prophet in a 'night vision.' It is unknown whether Daniel was or was not sleeping when the event occurred. Another example of dreams is found in Daniel 7:1 - 2.
Did Daniel see visions just before he fell asleep and then experienced dreams, both of which came from God? On the other hand, while he was dreaming, did he see vivid visions of four great world empires that he then wrote down when he awoke? The Bible seems to indicate visions can happen both during waking and sleeping hours.
Who had them?
The dreams of several Old Testament people are recorded in Scripture. They include King Abimelech of Gerar (Genesis 20:3), Jacob (Genesis 28:12, 31:10), Laban (Jacob's employer - Genesis 31:24), Joseph (Genesis 37:5, 9), an imprisoned butler and baker (Genesis 40), Egypt's Pharaoh (Genesis 41), Midianites who will soon be conquered by Gideon (Judges 7), King Solomon (1Kings 3:5), King Nebuchadnezzar of Babylon (Daniel 2:3, 4) and the prophet Daniel (Daniel 7).
What Joseph, Jesus' stepfather, dreamt on three different occasions is record in the New Testament (Matthew 1:20 - 23, 2:13, 19). The wise men who came to worship Jesus dreamt being told not to visit Herod the Great on their way back home (Matthew 2:12) and Pilate's wife has a disturbing dream about her husband's judgment of Christ (Matthew 27:19).
What is their purpose?
We find, from the Bible record of at least twenty dreams, that they were used for a variety of purposes, some of which are below.
To warn a person not to do something (Genesis 20:3, 31:24, Matthew 27:19)
To convey what will happen either in the near or distant future (Genesis 37:5, 9, 40:8 - 19, 41:1 - 7, 15 - 32, Daniel 2, 7)
To convey a spiritual truth (Genesis 28:12)
To confirm a promise (Genesis 28:13 - 14)
To offer encouragement (Genesis 28:15)
To inform someone or a group to do something (Gensis 31:11 - 13, Matthew 1:20 - 23, 2:12 - 13, 19)
To convey to an enemy their destruction (Judges 7:13 - 15)
To offer a gift from God (1Kings 3:5)
To warn a person they will receive punishment for their sins (Daniel 4)
Do they always represent the truth?
A busy schedule during the day can produce dreams at night (Ecclesiastes 5:3). They can also arise out of our own vanity and lusts (Ecclesiastes 5:7, Jude 1:8). According to Scripture, they commonly convey information and portray events that do not reflect the truth but rather represent our own vivid imaginations!
8. It shall even be as when a hungry one dreams, and behold, he eats, but he awakes and his soul is empty . . . (Isaiah 29:8)
2. For the household idols speak lawlessness, and the diviners have seen a lie and have told false dreams (Zechariah 10:2)
If a dream comes from God then it makes sense that only He can reveal its true meaning (Genesis 40:8, Daniel 2:27 - 28). Those who believe the Eternal is communicating with them using this method ought to pray and humbly ask if what they saw came from him and if so what does it mean. Psychics, mediums, fortunetellers, and alike are strictly forbidden to be consulted (Deuteronomy 18:10 - 14, Leviticus 19:26, etc.).
A stern warning
The Bible offers stern warnings against those who use dreams (those actually dreamt or lied about) as a means to convince others to break God's laws and rebel against worshipping him. In ancient Israel, those who practiced such things received the ultimate penalty.
32. Behold, I am against those who prophesy false dreams . . . (Jeremiah 23:32, see also verses 25 - 27)
1. "If a prophet rises among you, or a dreamer of dreams, and gives you a sign or a wonder, 2. And the sign or the wonder which he foretold to you comes to pass, saying, 'Let us go after other gods, which you have not known, and let us serve them,' 3. You shall not hearken to the words of that prophet . . . (they) shall be put to DEATH . . ." (Deuteronomy 13:1 - 3, 5).
In the end time
Although the New Testament gives far less significance to them than the Old Testament, it does state that just before the return of Jesus to earth that God will cause his people to have special dreams. The Bible records the apostle Peter, citing Joel 2, stating such a fact when he preached a powerful message on the day of Pentecost (Acts 2:17).