Watching children a play is a wonderful thing, pretending, dress-up, creating games in their heads. It's something I never really grew out of - and I think if most people could admit it they'd probably realise they haven't either. The "pretends" may evolve and become something more sophisticated but the principles are the same.
We all have hopes and dreams, all fantasize about something we'd like to be, would've liked to have been or situations we love to imagine ourselves in. Whether it's career related, sexual fantasies, conversations, people we'd like to meet, things we'd like to own, skills we'd like to possess, dreaming of another level of happiness, being reunited with people and so on. I spend a great proportion of my life living in my head, it's quite often preferable to the "real" world and it's comforting.
There are quite a few studies within modern psychotherapy about the benefits for patients with particular anxiety issues or with a history of trauma being able to mentally create "safe places". Methods of mentally being able to escape reality for a short while and take yourself somewhere outside (or inside if you see fit) of yourself and feel a calm sense of being somewhere else without actually going anywhere. strongly believe in the power of the imagination and the importance of dreams. Though I suppose it's quite important that you can come back ... may become a little bit sticky if not!
I feel fantasies are a vital part of being human, they're healthy and also something that essentially can just be for ourselves. I catch myself several times a day just dreaming of places I want to be 5 years from now, the person I want to be and I feel content having that hope and wanting it is a strong enough drive to make me go out there and make it happen, though I feel it's also incredibly important to not invest everything into dreaming - it's all about finding a fine balance. Of course I have my far fetched and ridiculous visualisations too (usually aided by more than several glasses of my dear friend le vin rouge and a musical soundtrack orientated iPod playlist) and these too are just as important - each little mental mirage has it's time and place and functions to carry me through the more mundane parts of life.