The Dreamlands are an alternate location that can be reached through our dreams. What they are exactly remains a mystery. Most reports of the Dreamlands indicate that they are a semi-stable reality, like a shared dream with consistent features for all visitors. Unlike reality, though, it is can be altered by the will of the observer with enough skill. What this implies about the realm is uncertain.
The Dreamlands seem to be an ancient and fantastic land, with monsters and spirits and unlikely geography. Cats seem to have a special place in them, while technology seems impossible. It is not an innocent place, however, because strange things hover in the dark shadows of the land. It is just that, outside the shadows, things seem simpler, like all dreams do.
Reaching the Dreamlands
While humans usually reach the Dreamlands when they are asleep, there are a number of places that are connected in some way to that realm, such as Kingsport. In addition, Ghouls seem to have the ability to physically cross into the Dreamlands, though it is unknown whether they can do it spontaneously or simply know of hidden entrances deep underground. If it is the latter, one wonders what entrances the Cthonians know about.
The Dreamlands are not the same as regular dreams, and the distinction between normal dreams and the Dreamlands have been noted in the original reports.
The Dreamlands may be a key part of the Mythos. It's easy to see it could be one of the main weapons we have in our fight to survive the Mythos (note I didn't say "defeat the Mythos"). The Dreamlands are older than humanity, yet large parts are ruled by humanity, and we can have great power there.
The Dreamlands that we have heard reports about are specifically those of the Earth, and it is said that other Dreamlands exist for other planets. Little is known about them. The only real report was for strange cat-like entities that were from the Dreamlands of Saturn.