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Allan Hobson and Robert McCarley, both psychiatrists and neurophysiologists suggested that while you sleep there is a part of your brain, located in the brain stem is periodically activated and produces impulses. This part of your brain is related to physical movement and the processing of information from you part pf your brain is related to physical movement and the processing of information from you sense when you are awake. When you are asleep, your sensory and motor abilities shut down but this part of your brain does not. It continues to create meaningless bursts of neural static and when some of these impulses reach other areas of the brain that are responsible for higher thinking and reasoning, your brain tries to make senses of these impulses in the form of a dream.
The Theory Being Tested:
Hobson and McCarley challenged Freud’s psychoanalytic perspective that stated your brain distorts the true Maning of dreams to protect you from their upsetting true content. They contended that dreams are not disguises of unacceptable urges but the results of the mind making sense of neural activity during sleep. They explained that images we see in dreams are the result of the mind finding stores memories to combine with these neural impulses produced in REM sleep (dreaming occurs during REM sleep stage).
Methodology Used:
Hobson and McCarley used two methods of research: 

Study previous work on dreaming. They cited thirty-seven different studies that backed up their hypothesis that REM sleep causes dreaming. 
Study research on the sleep and dreaming patterns of animals. Believing that all mammals experience the same stage of sleep they looked at how animals’ brains reacted during dreaming sleep. Using cats, they were able to stimulate or inhibit certain parts of the animals’ brains and record the effect on dressing sleep. 

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The Findings:

The part of the brain stem that controls physical movement and incoming information from the sense is at least as active during dreaming sleep as it is when you are awake. However, while you are sleep, sensory information from the environment around you and voluntary muscle movements are blocked. This immobilization actually occurs at the spinal cord and not in the brain so the brain can send motor information but the body cannot act them out.  
The main exception to this blocking of muscle movements is in the nerves controlling the eyes. This is the reason why rapid eye movement (REM) occurs when dreaming. 
REM sleep occurs at predictable patterns throughout the night, which would not be possible of it were due to a person’s unpredictable unconscious wishes. 
All animals studied cycled through the various stages of sleep with larger animals taking longer than smaller animals. This example demonstrates that dreaming sleep is physiological in all animals.
Hobson and McCarley claimed to have found the “dream state generator” in the brain. When they inhibited the pontine brain stem in cats, they would go weeks without going into dream (REM) sleep. When they activated this area during sleep they caused longer periods pf REM sleep. 

Why the Study Is Important?
The primary motivating force for a dream comes not from our unconsciousness but from a physiological process that occurs nightly when we experience REM sleep. During dreaming, the brain stem is not responding to sensory input or  motor output based on the world around you. Instead, it is activating itself internally. Images are called from your memory in an attempt ro match the data generated by the brain stem’s activation. It is because these neural impulses from the brain stem are so random that  your dreams seem so bizarre.