The Opposite of Lucid Dreaming

Maybe it simply stems from my having seen Waking Life at a young age, but I am fascinated by the study of sleep. REM sleep and lucid dreams are fairly common topics these days, but what about dreams that seem so realistic that the dreamer confuses them for a memory of reality? (Or is that just me...)

Where is this line between dream and reality? And in the end, what is sleep?