We understand through Srimad Bhagavatam and Brahma-sangita that this material creation is a dream of Maha-Vishnu. Maha-Vishnu is an expansion of Lord Krishna(God) who lays down on the Causal ocean. He remains in a sleeping state called yoga-nidra. This state is not like our sleeping. Obviously, the Lord's sleeping and dreaming is able to produce millions of material universes, so how can we compare His sleeping with ours. So that is one aspect of this world being dreamlike. Shrila Prabhupada in the Fourth Canto of Srimad-Bhagavatam, Chapter 29, text 83 purport states: "This material creation is the spirit soul's dream. Actually, all existence in the material world is a dream of Maha-Vishnu. This material world is created by the dreaming of Maha-Vishnu. The real, factual platform is the spiritual world, but when the spirit soul wants to imitate the Supreme Personality of Godhead, he is put into this dreamland of material creation." Basically, we're in God's dream.
How do we escape from this dream and return to reality? By associating with spiritually-minded persons. They will show by example how to be freed from this illusion.
What about our dreams at night? Shrila Prabhupada states in Fourth Canto, Chapter 29, text 64 purport: "In dreams we sometimes see things that we have never experienced in the present body. Sometimes in dreams we think that we are flying in the sky, although we have no experience of flying. This means that once in a previous life, either as a demigod or astronaut, we flew in the sky. The impression is there in the stockpile of the mind, and it suddenly expresses itself."
Of course, when we chant Hare Krishna Hare Krishna Krishna Krishna Hare Hare/ Hare Rama Hare Rama Rama Rama Hare Hare, the impressions on our mind is changed to a transcendental nature. Then at night, we can dream of Radha-Krishna and the devotees.