In dreams we think, try to figure things out, make decisions and act. The dreamer though, has set up the situation for one who finds him/herself in that situation. The dreaming subject, then, is double. We recognize the capacity for acting in a situation one finds oneself from waking life. Also, we have the capacity for conjuring up mentally a hypothetical scenario of a certain type and placing ourselves in it. We might do that when thinking about future or past events, or imagining someone else's experience, as when reading fiction or seeing a movie.
The unconscious is sloppy, not concerned with precision. So two people can fuse, or one separate into two. Geographies are uncertain too. The acting subject tries to deal with the incoherence set forward by the scenario-projecting subject, who has set things up in a confusing way, simply because the unconscious mind doesn't care about precision in that way. The conscious dreamer can accept reality as it is presented in the scenario, or also question it. I think it's Kafka who best captures that particular incoherence: it's not that the dream is strange, but that we often go along with that strangeness, or our protests are ineffectual when we do question it. We ought to have freedom to dream what we want, but instead our minds present diminished, less free versions of reality itself. We are trapped by our own minds.