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On several occassions I've had dreams in which I can understand what a person is saying, yet I cannot remember what they said word-for-word. In fact, it's like they never said any words... Like it was a language exclusive to dreams. You can't put what they're saying in words, but you can somehow understand it. The same happens for text, as well, such as when I dreamt that I was IMing my friends, most of the text was blurred, yet I could still understand it.
Does this happen to anyone else?
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That happens to me. I have dreams where there's definitely speaking, but it doesn't feel like it was speaking. I never really notice it at the time, but afterwards it doesn't feel like anyone actually spoke. In my few lucid dreams, I've had a number of characters just stare at me blankly when I asked them questions. One even faded into nothingness in the face of steady questioning. I think that was a gentle reminder to me not to question my dream world so much so quickly, to just play in it and explore it.
I think it's because the whole dream is in our head. We don't need to speak in order for dc's to communicate with us. Speaking is also a very physical activity, so it's quite understandable that it would be different in dreams, just like poking your palm with your finger seems to feel quite different to most people in a dream.