Cats dream just like people do. The difference is that the cat in this video seems to be dreaming it’s pedaling a bicycle. Then something appears to happen and the cat seems to crash on its side.
Watching a cat pedal in its sleep and then crash on its side is the reason why the Internet exists: to provide as many amusing cat videos as possible. If more people would share cat videos, perhaps fewer nations would ever start a war for fear of hurting somebody’s cat.