You really can’t take the dreams out of *Twin Peaks *and still tell the same storey.
In Northern Exposure, the dreams are integral to the character development, but not always necessary to the plot.
The Times Square bit in Vanilla Sky.
I can’t possibly have anything to add to this thread, as I for one think the dream sequence in The Sopranos were some of the best ever done.
The “Twilo” episode of The Dick van Dyke Show. Wonderfully funny, off the wall, and it has dreams-within dreams-within dreams ages before Inception. It also gave Producer Danny Thomas a way to guest star in the episode without playing himself.
Let me tell you about my happy horse 
Also true for medium, which I’ve enjoyed for the way it changes up Allison’s dreams and visions in interesting ways.
I loves Joel’s fever dream, where he gives birth 
I almost always dream in third person. I also die in my dreams occasionally.
Now that I think about it the ‘death’ I remember the most vividly is one I had in First Person.
This is a bit off-topic, but I thought the LSD sequence in the film The Doors was a particularly on-target depiction of the acid experience.
Papillon
Second dream sequence is the best I’ve ever seen.
I just logged on to say yes, I just remembered, it’s “lovely” horse. I’m sure it’s happy too though.
Gilligan climbs the beanstalk? Blanche’s dead husband? Dorothy being pursued romantically by Lyle Waggoner and Sonny Bono? Frasier in bed with Freud?
I don’t usually dream, but i have a feeling i’m in for a few nightmares tonight…
I’ve always admired Virginia’s dream sequence in The Tenth Kingdom miniseries. It does a great job mixing contemporary and fairy tale symbolism, and expresses the unspoken resentment she has towards her father. It’s great that she feels responsible for her actions in the dream, saying, “I never should have eaten the apple!”
It’s pretty good for it’s “realism”, too; like many of my own dreams, it maintains a core narrative with changing details.
I’m quite fond of the dream episode Eureka did, ‘Noche de Suenos’.
I’m mostly fond of it because the very hunky male lead got a naked scene, and the other even hunkier male lead had a scene in a open-front shirt. Rowr!
It’s also quite a fun episode, and a fan favorite.
Me too–the movie is overall pretty funny, but that rant cracks me up every time.
I’ve always found David Lynch, whether it’s supposed to be a dream sequence or not, has been the best at capturing the ineffable feel of dreams in his work.
There was a dream sequence in Northern Exposure that really got the “dreamlike” feeling down. Anyone recall the phrase “toy cows in Africa, silly cows”?
I think this feeling was captured pretty well in Inception.
I second the Twin Peaks dreams. Love that dancing dwarf and the backwards speech that was reversed.
Also Nightmare on Elm Street
It seems that IO9 has been stealing article ideas from SDMB this week. 40 Lurid bizarre science fiction dream sequences