Somniloquy or sleep-talking is a parasomnia that refers to talking aloud in one's sleep. It can be quite loud, ranging from simple sounds to long speeches, and can occur many times during sleep. Listeners may or may not be able to understand what the person is saying.
Sleep-talking usually occurs during transitory arousals from NREM (non-rapid eye movement) sleep, which is when the body does not move smoothly from one stage in NREM sleep to another, and they become partially aroused from sleep. Further it can also occur during REM (rapid eye movement) sleep at which time it represents a motor breakthrough of dream speech, words spoken in a dream are spoken out loud.

Sleep-talking is very common and is reported in 50% of young children, with most of them outgrowing it by puberty although it may persist into adulthood (about 4% of adults are reported to talk in their sleep). It appears to run in families.

Sleep-talking by itself is harmless; however, it can wake up others and cause them consternation—especially when misinterpreted as conscious speech by an observer.

(thank you wikipedia... lol)