I think there is a difference between
knowing you are dreaming, and
understanding you are dreaming. In a normal dream, some part of you may know it's a dream, and you go about your activies. You can fly and shoot lasers out of your palms without thinking twice about it. You may even be talking to a DC about it being a dream (which has happened to me plenty of times). But when you get that snap, where you realize and understand "Oh! This is a dream! I can do whatever I wish, there are no laws" – and truly comprehend its implications, I think that's when you're truly lucid. I don't really think you have to say the words, as long as it's what you're thinking – though saying it out loud can reinforce it too. The thing is, you can say "I'm dreaming!" over and over and not really think about it. On the other hand, you can also say "I'm dreaming" in awe and amazement when the true realization dawns upon you.
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