To be fair, we don't know how the "dream machines" work, how people are "hooked up" or what. Simply because it doesn't matter, the dream machines and their mission aren't the story. They could've had them sit in the chairs with their heads "wired" to phones made of tin cans and shoe-strings for all I care, how they dream and how the technology works isn't the story. For the same reasons in Star Trek it doesn't matter how Warp Drive works, what Warp Factor 9 is in terms of multiples of c, etc. as even in Trek the FTL and space exploration isn't the story, the story is The Human Condition and exploring that, the space-travel is just the backdrop. And who cares how dreams work in the real world, something that is debated at length today by different doctors, scientists and psychologists; the movie lays out how dreams work in it. and gets away with its... loose interpretation of it by the fact that we don't know how dreams work, why they are the way they are and how people precieve them is different for everyone.