Everyone dreams but not everyone remembers their dreams. We spend about 2 hours a night dreaming and can dream in any sleep stage, but most dreams occur in REM Stage of your Sleep Cycle. REM dreams seem to be more vivid. Some people dream in colour, others in black and white.
The exact purpose of dreaming isn’t known, but it seems that it helps to process emotions and events from the day. We are more likely to have frightening dreams when we are anxious or stressed.