The Book The Sleep Solution or Why We Sleep touches on this. It also claims that REM sleep is a core part of this experience. The analogy that I found most useful is that REM sleep writes data from the cache to hard disk. In the process it cleanses that data reducing the emotional overload attached with it.

Say you just experienced grief. Dreaming about it is an essential in the process of getting over it.

REM sleep is inhibited when you use sleeping pills or alcohol.