Sigmund Freud's (1856-1939) psychoanalytic distinction between the conscious and unconscious mind significantly changed our understanding of humanity as being "divided." He has some interesting thoughts about day-dreams that he applies to the creative process of writing literature and poetry:
"...the day-dreamer carefully conceals his phantasies from other people because he feels he has reasons for being ashamed of them. I should now add that even if he were to communicate them to us he would give us no pleasure by his disclosures. Such phantasies, when we learn of them, repel us or at least leave us cold. But when a creative writer presents his plays to us or tells us what we are inclined to take to be his personal day-dreams, we experience a great pleasure...How a writer accomplishes this is his innermost secret; the essential ars poetica...The writer softens the character of his egoistic day-dreams by altering and disguising it, and he bribes us by the purely formal--that is, aesthetic--yield of pleasure which he offers us in the presentation of his phantasies."
All very interesting, with apparent grains of truth (?). For Freud, almost everyone day-dreams but not everyone is a poet or a creative writer. He traces most day-dreams back to childhood experiences and sees creative writers as fulfilling an important function:
"all the aesthetic pleasure which a creative writer affords us has the character of fore-pleasure of this kind, and our actual enjoyment of an imaginative work proceeds from the liberation of tensions in our minds. It may even be that not a little of this effect is due to the writer's enabling us thenceforward to enjoy our own day-dreams without self-reproach or shame." /ez
(Quoted material from Freud's lecture, "Creative Writers and Day-Dreaming" (1907), which was subsequently published in the Neue Revue in 1908).