The "dream species" were a species native to a planet in the Delta Quadrant. They were tall humanoid with orange skin and sharp ridges on their forehead and on the front of their neck, with a horn spouted from their chin. This species existed in a collective dream state which they considered to be their reality. Physically, they (or at least a group of them) were found as hundreds of sleeping bodies in a cavern on a planet. As of 2374, they had never been assimilated by the Borg.
They claimed that for centuries, what they termed the "Waking Species" had come and found them in their so-called sleep state and tried to destroy them. By the 2370s they had found a way of defending themselves, which involved a machine that broadcast a neurogenic field. With this, they could invade the dreams of nearby starships, and eventually force their crews to go to sleep. While this dream state appeared to be simple sleep based on analysis by The Doctor, he was incapable of waking any of the affected victims up using artificial means such as drugs or external stimulants, although he was able to provide drugs to keep the crew awake so they wouldn't be trapped in the dream. The crews would then be trapped in a shared dream, theorized to be a collective unconsciousness, in which the aliens would take over the ship.
USS Voyager was attacked in this way in 2374, but they were defeated by Commander Chakotay, who had unusual command of his dream using a technique called lucid dreaming, allowing him to plant a "trigger" in his mind where his subconscious would include Earth's moon in his dream, allowing him to realize that he was dreaming and wake himself up. With this method – and the aid of The Doctor, who, as a hologram, never slept anyway – Chakotay was able to stay awake long enough to locate the sleeping aliens in a cavern on a planet by tracking the energy field they created to maintain their dream. With The Doctor ordered to launch a photon torpedo at the cavern if Chakotay didn't respond, Chakotay was able to fall asleep and confront the aliens, forcing them to dismantle the transmitter that the aliens used for their dream attacks and end the crew's nightmares before The Doctor destroyed their physical bodies. (VOY: "Waking Moments")