The purpose of dreams is to sleep. Dreams also represent wish fulfillment. A dream is the result of a mediation or compromise between these two opposing forces. Freud defines the manifest content of dreams as that which an individual is dreaming in a particular dream, its primarily apparent subject matter. In contradistinction to manifest dreams Freud differentiates latent dream content, the elements composing the true purpose or meaning of a dream. Through dream analysis one can unravel the manifest dream content in order to arrive at the dream's meaning, which is embodied in the latent dream content, and is termed as the dream-thought.

Dream-thoughts are contained within the latent dream, and represent the true wishes and anxieties of an individual. But the true meaning of a dream, its dream-thought, cannot be known merely by examining the manifest dream content. There exists a filter, Freud argues, a mechanism that alters the dream's meaning so that it appears in consciousness as a disguised wish, a distorted impulse. This intervening mechanism Freud called the dream-work.

The dream-work is continuously at work during an individual's sleep process. It is constantly preventing unconscious wishes, anxieties and impulses from infiltrating consciousness, or only permitting them to appear in the manifest dream in a distorted form. It follows from this that these latent wishes are unacceptable to consciousness, since they would challenge the individuals consciously-avowed sensibilities (customary, moral or otherwise) to the point that they would threaten the very purpose of the dream, namely the preservation of sleep. In other words, the dream-work acts as a censor, a gatekeeper entrusted with the job of making the dream-thoughts palatable as they pass through the limbo between the conscious and unconscious realms. The dream-work is responsible for the difference between latent and manifest dream content.

The constantly active dream-work mechanism paints a new picture every time and individual dreams distorts the dream-thought, or wishes. One of the "tools" or devices available to the dream-work is displacement, where the most important elements of the latent dream content become insignificant or trivial when depicted in the manifest dream. Using displacement as a form of censorship the dream-work thwarts the emergence of important subconscious impulses and wishes, making them seem meaningless and irrelevant. This shift is administered to both ideas and emotional accentuation in latent dreams in order for sleep to be preserved.

Another device used by the dream-work is condensation. This is a process of censorship where several elements (i.e. dream-thoughts) in the latent dream are consolidated or compressed into a single thought, feeling, action, event or person when said dream thoughts emerge in the manifest dream. Consequently, since the manifest dream is an abbreviated form of the latent dream it is much less rich in detail and meaning, or in any case not as explicit; a wide variety of dream thoughts appear as a single element. As a result of the use of condensation it is impossible to explain the multiple and indefinite aggregation of unconscious impulses, anxieties and wishes that compose an element in the manifest dream simply by examining this element superficially.

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