Hi Rose,
In psychoanalysis displacement (German: Verschiebung, "shift, move") is an unconscious defense mechanism whereby the mind substitutes either a new aim or a new object for goals felt in their original form to be dangerous or unacceptable, or too painful. Particularly about dreams, Freud describes
how we replace objects and subjects. For example your dog could be representing your s.o. A dream is not sign of craziness but a release of the mind to bring out unconscious mind contents that cause anguish, guilt, or other emotions. You can see Wikipedia for a good summary about mechanisms according to Freud. To me, it makes a lot of sense