I don’t think it’s consistent with lucid dreaming where you’re actively taking part in an experience rather than passively experiencing memories being encoded and other parts of your brain believing it’s a new experience.

It might be a part of what’s going on, but I believe there’s more to dreaming than that. Something involving the imagination/creative centres. If I had to guess, I’d say part of the reason we dream is the brain trying to learn by fitting random pieces of information together to see if it notices something new, though it’s the subconscious that gains most of any benefit from that.

It’s not

I don’t, that’s just my gathered understanding.

There is a lot more of course, I didn’t endeavor to explain all of mental function and dreaming in one forum post. Lucid dreaming, and very creative or even psychedelic dreams, and sleepwalking; there are many additional elements.