From The Four Foundational Practices of Dream and Sleep
The second foundational practice works to further decrease grasping and aversion. Whereas the first preparation is applied in the moment of encountering phenomena and before a reaction occurs, the second practice is engaged after a reaction has arisen. Essentially they are the same practice, distinguished only by the situation in which the practice is applied and by the object of attention. The first practice directs lucid awareness and the recognition of phenomena as a dream toward everything that is encountered: sense objects, internal events, one’s own body, and so forth. The second preparation specifically directs the same lucid awareness to emotionally shaded reactions that occur in response to the elements of experience.
Ideally the practice should be applied as soon as any grasping or aversion arises in response to an object or situation. The grasping mind may manifest its reaction as desire, anger, jealousy, pride, envy, grief, despair, joy, anxiety, depression, fear, boredom, or any other emotional reaction.
When a reaction arises, remind yourself that you, the object, and your reaction to the object are all dream. Think to yourself, “This anger is a dream. This desire is a dream. This indignation, grief, exuberance, is a dream.” The truth in this statement becomes clear when you pay attention to the inner processes that produce emotional states: you literally dream them up through a complex interaction of thoughts, images, bodily states, and sensations. Emotional reactivity does not originate “out there” in objects. It arises, is experienced, and ceases in you.
There is an infinite variety of stimuli to which you may react: attraction may arise at the sight of a beautiful man or woman, anger at a driver that cuts in front of you, disgust or sorrow at a ruined environment, anxiety and worry about a situation or person, and so on. Every situation and reaction should be recognized as a dream. Do not just slap the sentence onto a piece of your experience; try to actually feel the dream-like quality of your inner life. When this assertion is actually felt, not just thought, the relationship to the situation changes, and the tight, emotional grip on phenomena relaxes. The situation becomes clearer and more spacious, and grasping and aversion are directly recognized as the uncomfortable constrictions that they truly are. This is a powerful antidote to the state of near possession and obsession that negative emotional states create. Direct and certain experience of using this practice to untie the knot of negative emotion is the beginning of the real practice of lucidity and flexibility that leads to consequent freedom. With consistent practice, even strong states of anger, depression, and other states of unhappiness can be released. When they are, they dissolve.
The teachings generally refer to this particular practice as a method to give up attachments. There are healthy and unhealthy ways to give these up. It does one little good to suppress desires; they are then transformed into internal turmoil or external condemnations and intolerance. And it also works against spiritual development to attempt to flee from pain through distraction or by tightening the body in order to choke off experience. It can be healthy to give up worldly life and become a monk or a nun or it can be an unhealthy attempt to escape difficult experiences through suppression and avoidance.
Dream yoga cuts attachment by reorganizing the perception and understanding of the object or situation, by altering the view and thus allowing the practitioner to see through the illusory appearance of an object to its radiant, light-like reality. As the practice progresses, objects and situations are not only experienced with greater clarity and vividness but are also recognized as ephemeral, insubstantial, and fleeting. This levels the relative importance of phenomena and diminishes the grasping and aversion based on preference.
From The Tibetan Yogas of Dream and Sleep by Tenzin Wangyal Rinpoche