I've heard about this before but I do have one question. Isn't it possible that there is some disadvantage to doing this frequently instead of having regular dreams, even if one isn't immediately apparent?
First I found it already harder after the first few successes to get into the lucid state. Like my mind finding more and more clever excuses telling me in dreams why I'm not dreaming despite obvious dream-like things happening. So some sub-conscious part of me obviously wasn't really wanting the lucid dreaming. Also dreams started to get more intense - which isn't always a good thing as a waking up from a cruel dream can mess up your thinking seriously for the rest of the day.
Then there is also the part that to get into lucid dreams you have to think a lot about dreams.That simply costs time, especially if your job is already about thinking (like programming).
And certainly we still don't know enough what dreams are actually for. We know it has to do with learning - but there are also theories that it has to do with forgetting unimportant things. Messing that process up might certainly have disadvantages.
Still... if I ever have enough time again to really train it I will probably give it another try. It seems like one of the very few ways we have to inspect our own mind and I'm just too curious to not want to do that.
By the way, if you are really interested in this subject take a look at the open book here: http://en.wikibooks.org/wiki/Lucid_Dreaming (I have submitted this before to HN but it never hit the front page)
The dreams aren't so much nested as in sequence. You have a dream, you become lucid, you get excited, you think you're going to wake up, and so you dream about waking up and become un-lucid again.
EDIT: Having read through a lot of the book now, it's very interesting to consider what's going on and the metaphysical implications are intriguing. I digress, what I'd like to know is how do you know that you have not simply dreamt that your dream was lucid. How can you really know you have control as opposed to having dreamt you have control; this question finds an analogue in the question of freewill in [wakeful] life.
1) I was dreaming
2) I had the conscious thought "hey, this stuff doesn't make sense. I am dreaming. Wow, I am aware that I'm dreaming, even though I'm dreaming."
3) I then took conscious steps to alter my dream, for instance, stepping out of the car within which I was and flying away.
Of course, you could try arguing that I just dreamt that I was making conscious decisions, but that's just splitting hairs.
That's exactly what I was intimating. Some believe that freewill is a similar illusion. There is no clear way to know, except that within the restricted arena of your dreams, assuming you're an honest person, then we can ask you to dream a certain thing in advance and see if you can.
That doesn't rule out the dream being a created memory that doesn't occur until you come to "remember" it however.
I experience that with normal dreams. I suspect it happens to anyone who has a vivid dreamlife. I wouldn't let this scare off any would-be lucid dreamers.