Dreams and Hallucinations are often seen in Teen Wolf to represent a character's internal struggles, and are sometimes caused by supernatural forces.
In Pack Mentality, Scott McCall had a dream that was a modified version of a fight that he had in the middle of the night when he was involuntarily called out of bed by the Alpha to kill Garrison Myers together, although Scott ultimately defended the man rather than do as the Alpha asked.
In the dream, Scott was at the high school at night with Allison Argent, whom he was Scott and Allison. The two were giggling and holding hands as they walked toward the bus bay, and when Allison asked him where they were going, Scott simply stated that they were going somewhere they could be alone. They then sneaked onto one of the school buses and teased each other by sitting in seats in opposing aisles until Scott, unable to hold off any longer, crawled over to Allison's seat and began passionately kissing her.
Unfortunately, as Scott began kissing Allison's neck, his claws extended, indicating his arousal was causing him to transform against his will. He quickly pulled away and turned so that Allison couldn't see his glowing gold eyes and fangs, and when she asked him if he was okay, he sharply warned her to stay away from him. However, since Allison did not know what was going on, she continued to push as she moved in front of him, eventually seeing Scott fully transformed and gasping in shock. Terrified, she rushed towards the exit to get away from him, but the door was jammed and wouldn't open, trapping her inside with Scott, whose inner wolf was now totally in control. Despite her cries for help and her attempts to escape, Scott viciously attacked her and presumably killed her.
Scott then awoke to find out that this was all just a dream. However, when he arrived at school that morning, he found that the bus bay was cordoned off with police tap and the bus he dreamed about was covered in blood and claw scratches, making Scott terrified that it wasn't a dream and that he really did kill her. He was unable to reach her on her phone, which only made his concerns worse, but it was soon revealed that Allison was fine, and that the actual victim, Garrison Myers, was taken to the hospital.
In Party Guessed, Lydia Martin was dreaming that she was in the shower, gingerly touching the still-healing bite and scratch wounds on her side, when she suddenly heard someone say her name. She turned off the water and slowly opened the shower curtain to investigate.
Suddenly, Lydia was standing on the high school lacrosse field, wearing her silver Winter Formal dress, while the people in the stands cheered her name and held up signs that say "We love you, Lydia!" Though everyone in the bleachers seemed to be very cheerful and excited, there was one girl (implied to be Laura Hale) sitting at the right end of the bottom row, sobbing. Before Lydia could process what is going on with the girl, Peter Hale approached her on the field, knocking her onto the ground and climbing on top of her, just as he had done when he attacked her.
She then seemingly woke up in her bed, where she found that her sheets were full of dirt and Peter was laying next to her. Lydia tearfully told him to leave her alone, but Peter, with feigned sympathy, explained that he couldn't do that yet. Lydia went on to ask if Peter was real or imagined, and Peter, amused, remarked that the answer was also "not yet."
Peter proceeded to promise that everything would soon be going back to normal, so long as she did everything that he asked. The two began walking down the staircase as he began explaining his plan-- it needs to happen on the full moon in March, which is known as the Worm Moon. Lydia immediately whimpered when she realized that the ground and Peter were covered in worms, and Peter implied that the plan was to resurrect him by stating the Worm Moon was meant to represent rebirth, as the ground began to thaw and winter began to turn into spring.
Lydia quickly realized that the full moon he was talking about was on Wednesday, which was her birthday. Peter, proud of her deduction skills, praised her before pointing out that her birthday party is always the party of the year, and that everyone wanted to go to it. Peter went on to say that they needed to make it a very special party, and when Lydia nervously asked what would happen if she didn't, Peter warned her in a kind voice, "I think it's best that we just make a plan and stick to it. That way, no one gets hurt."
Lydia, knowing that she had to go with Peter's plan in order to ensure no one she cared about got hurt, sadly asked him why she was the one he was haunting. Peter smiled and replied, "Because Lydia Martin is not only beautiful, not only incredibly intelligent... she's immune." Confused, Lydia asked what she was immune to, and Peter smugly retorted that "they" (i.e. Scott McCall, Stiles Stilinski, Allison Argent, and Jackson Whittemore haven't told her yet. He sympathized with her for being the last to know everything and acknowledging that it didn't feel good to be left out. He went on to say that Lydia deserved to know everything, but that it would probably be best if he just showed her. Suddenly, Peter in his Alpha form broke through the window and lunged at Lydia, causing her to truly awaken with a scream.
In Time of Death,
In Chaos Rising,
In The Divine Move,
In Required Reading,
In Strange Frequencies, Lydia, Malia, Scott and Parrish all experience frightening hallucinations brought by the Dread Doctors. Lydia hallucinates having her tongue ripped out of her mouth by Tracy Stewart, Scott hallucinates being choked to death by Kira Yukimura (Kitsune), and Malia hallucinates being stabbed through the neck and arms through the floor.