For the most part, I ascribe to Freud’s theory of dreams.  For those who haven’t read The Interpretation of Dreams, I can’t recommend it enough.  It takes a far more intelligent and scientific approach to the subject then most books I’ve read about dreams.  Basically, his theory is that all of our dreams, even nightmares, represent the fulfillment of a wish.  This makes a certain common sense to me.   A dream is an experience your mind tricks you in to thinking that you’re actually having.  Clearly there must be a part of your mind that wants and even needs to have this experience.
However, I differ from Freud when it comes to the method of interpretation.  Not that his isn’t a valid method, and not that it doesn’t produce results.  It just isn’t very useful for my purposes.  It works in the wrong direction from where I want to go.  Freud believed that the wish is buried in what he called the “latent content” of the dream.  To get to this latent content involves considering each particular detail of the dream in isolation and then free-associating from these details to any random thoughts that come to mind.  By following this method, it is hoped that one can uncover any repressed desires that are expressed in the dream’s wish.
For me, this method misses the forest because it’s too busy digging up the roots of the individual trees.  I think there is truth and meaning to be found if you also step back from the dream, consider it as a whole, and look at the structure and design of it.  For instance, say a woman has a dream where her cat runs off and she searches the whole wide world for it.  Freud would have the woman consider the cat, the door it ran out of, each place she stopped to ask for the cat, ect.  He would go one by one down the list.  Again, it’s a valid method, and no doubt he made a lot of progress with patients this way.  But I would step back and look at the overall idea of her searching the world for her cat, and see if there’s personal meaning to be found there as well.  This approach has definitely served me well when it comes to crafting stories out of my dreams.