The dream occurs in Act 2, sc. 2, at the end of the scene and when Hermia awakens, she calls out for Lysander. He's gone because he has already awakened, having had his eyes annointed with the nectar from the flower that makes him fall in love with whomever he first sees upon waking. Puck did this mistaking Lysander for Demetrius. Lysander saw Helena when he first awoke so that is who he has gone off in pursuit of. The dream is fitting because it brings out the theme of unrequited love and emotional pain. Hermia says in her dream that a snake was on her chest, eating out her heart while Lysander just sat there and watched, smiling. Since Lysander will soon tell her that he doesn't love her any longer, that he loves Helena, that will "eat" out her heart. The smiling Lysander of the dream indicates his lack of caring for Hermia's pain. The snake can either be looked upon as Helena, since that is who Lysander now loves, or as Lysander himself, since he is the one who will hurt Hermia.