Why Do We Know We Have Dreamed When We Wake Up?
Because we remember some of our dreams. Sometimes we do not remember the dreams we dreamed. This is just like what happens when we are awake. We remember some things and forget others.
Dreams are a sort of safety valve in our sleep. We dream because not all of our brain is asleep at the time and it is a wise provision of nature that permits the waking part of the brain to go on working without disturbing the sleep of the other parts of the brain. If a large part of the brain is awake and engaged in making the dream, we are very apt to remember the dream; but when we dream and cannot remember what the dream was, it is because only a very small portion of the brain was awake and making a dream.