Fantasy in a psychological sense refers to two different possible aspects of the mind, the conscious, and the unconscious.
A fantasy is a situation imagined by an individual that expresses certain desires or aims on the part of its creator. Fantasies sometimes involve situations that are highly unlikely; or they may be quite realistic. Fantasies can also be sexual in nature. Another, more basic meaning of fantasy is something which is not 'real,' as in perceived explicitly by any of the senses, but exists as an imagined situation of object to subject.
In everyday life, individuals often find their thoughts pursue a series of fantasies concerning things they wish they could do or wish they had done...fantasies of control or of sovereign choice...daydreams'.
George Eman Vaillant in his study of defense mechanisms took as a central example of 'an immature defense...fantasy — living in a "Walter Mitty" dream world where you imagine you are successful and popular, instead of making real efforts to make friends and succeed at a job'. Fantasy, when pushed to the extreme, is a common trait of narcissistic personality disorder; and certainly 'Vaillant found that not one person who used fantasy a lot had any close friends'.
Other researchers and theorists find that fantasy has beneficial elements — providing 'small regressions and compensatory wish fulfilments which are recuperative in effect'. Research by Deirdre Barrett reports that people differ radically in the vividness, as well as frequency of fantasy, and that those who have the most elaborately developed fantasy life are often the people who make productive use of their imaginations in art, literature, or by being especially creative and innovative in more traditional professions.
The Fantasy Principle
The postmodern intersubjectivity of the 21st century has seen a new interest in fantasy as a form of interpersonal communication. Here, we are told, 'We need to go beyond the pleasure principle, the reality principle, and repetition compulsion to...the fantasy principle ' - 'not, as Freud did, reduce fantasies to wishes...[but consider] all other imaginable emotions'; and thus envisage emotional fantasies as a possible means of moving beyond stereotypes to more nuanced forms of personal and social relating.
Such a perspective 'sees emotions as central to developing fantasies about each other that are not determined by collective "typifications"'.