Strange/Familiar locations in our dreams

It is 7:45 AM and I am fairly groggy. Kids are being whisked off to school, and my second pot of dark roasted motivation is being brewed.
As I sat here and mentally fumbled, assisted by caffeine, somehow I managed to remember fragments of a dream I had last night. Now, the details of the dream aren't really too important - they ARE vaguely interesting and I honestly wish that I could recount more than a few snatches of particularly vivid images but that world is fading fast from me and most likely will have disappeared entirely within the span of the next half hour.
All that I really remember from the dream is a tree growing by some sort of ruins.
I also remember a structure that was built in a geometrical pattern, that some sort of tree was growing IN, and also OUT OF - but these structures were ancient. These were huge, a dozen feet in diameter - made out of some sort of block with patterns, with portions of the structure being "inset"
I also remember me being commisioned to clear out brush & undergrowth creating a direct line of sight between two points on the ground which intersected near where the trees were growing in the artifacts.

Now even stranger still, was that I remember making a comment to someone regarding the water level of either a river or a lake in relation to one of the ruins, stating that it was a lot lower than what I remembered it to be. There was, and has also been in unrelated dreams, a sense of familiarity of my surroundings even though I am 100% sure I have NEVER been anywhere like what I have dreamed about, much less for long enough time to know my way around the place.

I can usually sit back with dreams I remember and pick apart the fragments and understand where they came from because they will usually all have roots in something that has happened during that day, in my waking hours.
The point of this post is not an analysis of the meaning of the dream, it is a question of sorts I suppose - on exactly WHY is it that we can readily accept the nonsensical events that happen in our dreams without ever once thinking that anything is out of place? A dreamer can go from talking to a person, who morphs into a cat, who morphs into a flower, then who IS the flower who morphs into a cow that suddenly sprouts wheels and drives away but you see it from a THIRD person point of view! And this makes PERFECT sense in the dream, and it's NOT until we wake up that ANY of it STOPS making sense. How can I possibly "know" a place that I've never been? My mind created the entire world, and I already had a map of it? Or is it involuntarily created by my mind as I move through it, and I see what I expect I will see - however this implies implicit control over subject matter in a dream, which is an ability few can claim as being common.
Why is it that we can see the impossible, experience the insane, and it seems no more unnatural than watching someone cross the street? I know what a cat looks like. I can recognize on in a dream with no problem. I also know that it is impossible to carry on a conversation with a cat. Why is it that I can perform the cognotive function of recognizing the cat - yet when it speaks, and morphs, and I BECOME it, then I am watching it - no rules are violated. My brain doesn't catch it.

Any input?


PS - I never had a dream about becoming a cat. I used this as an example.