According to Freud's theory of dream interpretation, distortion is a key element in both dream content and psychic life. Freud believes that the unconscious mind is responsible for creating dreams and that these dreams are symbolic representations of the unconscious wishes, desires, and conflicts that people experience in their waking lives. After arguing that dreams are wish fulfillments, Freud introduces the concept of distortion in Chapter 4 and then spends Chapter 5 explaining the different ways dreams typically distort their wish content.

Distortion in dream content refers to the ways in which the unconscious mind alters itself “as a means of disguise” (102) of wishes, desires, and conflicts in order to make them more acceptable to the dreamer's conscious mind. For example, if a person has a repressed desire for a forbidden sexual encounter, the unconscious mind might represent this desire in the dream as a harmless or innocent activity, such as riding a horse: “Wherever a wish-fulfilment is unrecognizable and disguised there must be present a tendency to defend oneself against this wish [...] the wish is unable to express itself save in a distorted form” (102). This leads to Freud’s concept of the latent (hidden) and manifest (obvious) content of the dream: The manifest content is a distortion of the latent content, which can only be perceived through dream interpretation.