At one time, there was on the market a device which was intended to
induce lucid dreaming. Worn on the arm, when it detected changes in breathing indicating the
R.E.M. state in the dreamer it would administer a tiny electric shock to the wrist - enough stimulus to wake up the dreamer 'inside the dream', but not to trigger complete waking from sleep.
It was invented by Keith Hearne, a psychologist at the University of Hull, who was the first researcher to have a lucidly dreaming subject signal their state at the time of dreaming, via controlled movements of their body.
In sleep, we generally do not have control over our muscles - they are 'paralyzed' - but during the dreaming state, the eyes may move rapidly: REM (Rapid Eye Movements) are another way of detecting the presence of dreaming.
Hearne's subject, Alan Worsely, was able, during REM, to successively move his eyes eight times right and left, which was monitored and observed by Hearne. This experiment effectively put an end to more than 50 years of skeptical theorizing by psychologists about lucid dreaming, since the term was coined by Dutch psychiatrist Frederik van Eeden in 1913, that 'consciousness' during sleep was simply impossible, and lucid dreams purely an invention or illusion.
A lucid dream, therefore, is not just one in which the fact that you are dreaming is part of the scenario of the dream. The important thing about the lucidity is to do with control, but is not simply control.
What (to me) indicates the presence of lucid dreaming is that your thoughts, memories, knowledge and intentions are closely connected with the ones in your everyday waking consciousness. That is to say that in a lucid dream, you won't be fooled by the sort of dream logic that serves as a rationale and explanation for events in ordinary dreams - you are, in effect, the same person that you are when you are awake. This (I believe) is not a strict either/or dichotomy, but a matter of degree.
Myself, I've had a couple of lucid dreaming episodes.
In one, I 'came to' inside the dream in a large underground shopping mall (I remember lots of escalators) which was populated largely by troglodytes (think Aldous Huxley's 'Epsilons' from Brave New World.) The process of waking was a bit like it is when waking normally - characterized by some confusion and a bit of 'mugginess'. As I went through this, culminating in the realisation that I was dreaming, I was ascending the escalators (the people around became less trogg-ish) eventually 'surfacing' through a manhole in the Crescents, a housing estate in which I had lived previously.
As I'd been interested in lucid dreams for some years (starting with my reading the works of Carlos Castaneda) I was excited and exhilerated by the knowledge that I was actually having one, and decided that I'd test my ability to fly. My first attempts failed - embarrassingly (there were a couple of 'people' present) I hopped off the ground only to fall back down in the normal way! I dodged round a corner, out of sight of my 'observers', and tried again. This time I was able to stay aloft.
I found that I could direct my movements by fixing my gaze in the direction I intended to move, and had a bit of fun swooping around the Crescents, arms by my sides in Superman fashion. If I attempted to go straight up, the featureless sky was impossible to concentrate on, and I lost my sense of direction. So I was only able to 'fly' in directions produced by focusing on spots where ground features, or the horizon, were within my field of vision.
Coming to rest, like Spiderman, sticking to the wall of one of the Crescents, I observed my hands (as Carlos is instructed to do in the Castaneda books.) This was more for the fact of doing it than for the purpose of making my dream lucid, since it had been an ambition for several years, and I already knew I was having a lucid dream.
I 'woke up' (normally) shortly afterwards.