When we are asleep, we generally dream but these dreams are rather vague, irrelevant or incomprehensible. Freud and other psychoanalysts like Jung, etc. say that these dreams could be interpreted and made comprehensible with the help of a psychoanalyst and the interpretation can be applied to make a psychiatric patient healthy.
Freud says that these dreams are fulfillment of wishes and we wake up when wishes are fulfilled in the dreams. However, interpretation of the dreams is outside the scope of this article.
The daydreams are not vague or irrelevant or incomprehensible but are simple, relevant and comprehensible. Only their relevance has to be understood. These dreams are also fulfillment of the wishes and are generally reversals of our present positions spontaneously performed.
If broke, we dream in our daydreams about winning the sweepstakes. If we are not in love, we dream of marrying a beautiful actress. However, this does not mean that we actually need to indulge in gambling but that we need to do something to get up and earn money even by taking some risks.
Similarly, we do not actually want to marry that actress but we would certainly be advised to development relationship with the beauty down the lane. If we dream of becoming a famous author or painter or actor then we may not actually become famous but we certainly have some latent talent in writing or painting or acting which is worth developing and which would give us mental satisfaction.
Sometimes a man like Dr. Sir Mohd. Iqbal or Tolstoy becomes fed up with the riches and the fame and turns to philosophy or religion for solace via his daydreams. Iqbal wrote, "Duniya ki mehfilon se ukta gaya hoon, ya Rab. Kya lutf anjuman ka jab dil hi bujh gaya ho. Sorash se hoon gurezan, dil chahta hai mera ke daman-e-koh mein in chchota sa jhonpra ho." (O my God, I am bored with the grand parties thrown in this world. What is the use of such parties, if there is no light in the heart. I am fed up with fame and my heart desires a small hut in the lap of the mountains.)
Daydreams can be a boon if followed in a practical way and may fulfill your ambitions in a limited way but if we continue to daydream without following them in a practical way, we are bound to become mad.