So in IMHO the fact that this person cannot see any of the dreams prevents them from understanding. If you really do not want to show non-users any dreams, why not just have a couple of made-up example ones?
I have an example in the tutorial. As I say in my recent comment, maybe I should have the tutorial / help section pop up automatically when people visit the site?
I added a "How does this work?" link to the login popup. Does that make easier to understand what's going on?