This involves four trainings: learning to retain conscious presence during dreams; controlling and increasing the content of dreams; overcoming fear in dreams and training in the illusory nature of dreams; and meditating on suchness [emptiness] in dreams.
In the first of these, retaining conscious presence during dreams, the principle method is that of the energy control that was gained by means of the inner heat yogas.
The practice begins in the waking state, during which you should cultivate the ability to bring the vital energies into the central channel...
During the day you should continually make firm the strong resolution to be aware in the dream-state, and should combine this with the practice of repeating to yourself the thought that whatever appears is like a dream appearance and should be recognized as a dream. Also repeatedly cultivate the thought that when dreams occur you will recognize them and implement the dream yogas.
The second level of the dream yoga training involves controlling and increasing the content of your dreams. Here you can engage in various transformative exercises, such as consciously initiating a particular dream pattern or else transforming the nature of the dream altogether. Alternatively, you can project yourself on the rays of the sun or moon to a celestial realm, such as the Thirty-three Heaven, or to a faraway human realm, and see what is there. You should train in all the various activities, such as going to places, flying through the sky, and so forth.
You can also engage in visionary travel by projecting yourself to the various buddhafields, such as Sukhavati, Tushita, Akanishta, and so forth. There you can meet with the buddhas and bodhisattvas, venerate them, listen to their teachings, and engage in many other activities of this nature.
As for the exercise of "increasing the contents of dreams," this refers to increasing the number of whatever appears in the dream. Whether the dream-objects are sentient beings such as humans or animals, or inanimate objects such as pillars or vases, you simply multiply them from one to two, from two to four, and so on, until hundreds and even thousands of the object appear.
The third level of dream yoga practice is that of overcoming fear in dreams and training in the illusory nature of dreams. Here, whenever anything of a threatening or traumatic nature occurs in a dream, such as drowning in water or being burned by fire, recognize the dream as a dream and ask yourself, "How can dream water or dream fire possibly harm me?" Make yourself jump or fall into the water or fire in the dream. Examine the water, stones or fire, and remind yourself of how even though that phenomenon appears to the mind, it does not exist in the nature of its appearance. Similarly, all dream phenomena appear to the mind but are empty of an inherently existent self-nature. Meditate on all dream objects in this way.
You should train in seeing dream phenomena in this way and then in transforming the dream world and its inhabitants into the supporting and supported mandala [i.e., residence and deities].
This training also includes seeing all that is experienced in dreams as being empty of a true self-nature yet manifesting as illusory appearances. Cultivate the vision of how all phenomena are a drama of bliss and void: all appearances arise as mandala and deities, these arise as illusions, and these illusions arise in the nature of the wisdom of bliss and emptiness.
The fourth level of the dream yoga training is that of meditating upon the suchness [emptiness] of dreams. This stage of the practice can only be undertaken when the training in retaining conscious presence during dreams has become stable.
Quoted from A Practice Manual on the Six Yogas of Naropaby Lama Jey Tsongkhapa [1357-1419]. Published by Snow Lion (1997) in The Practice of the Six Yogas of Naropa, translated by Glenn H. Mullin.