Why Dreams Are So Difficult To Remember: Precise Communication Discovered Across Brain Areas During Sleep

By listening in on the chatter between neurons in various parts of the brain, researchers from the California Institute of Technology (Caltech) have taken steps toward fully understanding just how memories are formed, transferred, and ultimately stored in the brain--and how that process varies throughout the various stages of sleep.

... during rapid-eye-movement (REM) sleep, the previously chatty neuron pairs seemed to talk right past each other, firing at the same rates as before but no longer in concert.

"It was surprising," says Wierzynski, "to find that the timing relationship almost completely went away during REM sleep."

Since REM sleep is the phase during which dreaming occurs, the scientists speculate that this absence of memory-consolidating chatter may eventually help to explain why dreams can be so difficult to remember.

via Why Dreams Are So Difficult To Remember: Precise Communication Discovered Across Brain Areas During Sleep.

Our mental models are disconnected from most body feedback during dreams, so pairs no longer being in sync during REM sleep  makes sense.  Dreams may simply be the byproduct of long term memory consolidation. This is why events from your day show up in your dreams.  Memory is also state specific. It is adaptive to not remember one's dreams too much.