Following the defeat of Ansem, Seeker of Darkness, at Sora's hands, a portion of the worlds attacked by the Heartless remain submerged in sleep. Yen Sid explains that though this means the Heartless cannot reach them, they are instead plagued by Dream Eaters, entities produced by the darkness present in these specific worlds and that seek the worlds' Keyholes. There are two kinds of Dream Eaters, benevolent Spirits and malevolent Nightmares, constantly in conflict with each other.
Shortly after Sora first meets Neku, the two of them are surrounded by Dream Eaters. Neku summons his own Dream Eater, a Necho Cat, and after the battle, he convinces Sora to partner with the Dream Eaters himself. Joshua suggests the same to Riku after they meet.
When Sora and Riku return to Traverse Town, they find that their companions have abandoned using Dream Eaters, and have instead simply banded together with their partners. They also find out that a powerful Nightmare, the Spellican, has been wreaking havoc on the city, and that the participants in the Reaper's Game are tasked with eliminating it. Sora and Riku manage to corner the Nightmare, but it summons several other powerful Nightmares as a diversion, allowing it to escape.
Eventually, Mickey's actions in Symphony of Sorcery accidentally summon the Spellican, who takes control of Mickey and forces him to continually conduct music, causing chaos. However, Sora, with Riku's help, manages to reach the Spellican and defeat him.
Riku eventually makes his way to The World That Never Was, and finds himself face to face with Ansem, who reveals that Riku has been within Sora's own dreams from the beginning as a Dream Eater, in order to protect Sora from the machinations of the new Organization XIII. However, the Organization had already managed to force Sora into a deep sleep.
After defeating Ansem and escaping to the real World That Never Was, Riku finds himself at a dead end, unable to reach the Castle That Never Was, where Sora is trapped. He soon notices Sora's Meow Wow at the entrance to the castle, however, and uses the power of his own Komory Bat to forge a link between the Spirits and ride a Dreamline to the castle.
Following Young Xehanort's defeat at Riku's hands and Sora's rescue, they return to the Mysterious Tower, and Riku dives into Sora's dreams in order to wake him up. In order to defeat the Armored Ventus Nightmare, Riku absorbs the power of all his Spirits and wins in one final clash.
After Sora revives, and Riku is named Keyblade Master, Sora decides to visit the sleeping Traverse Town again, and he is reunited with all of his Spirit friends.
Like the Unversed, Heartless, and Nobodies before them, the Dream Eaters come in a variety of shapes, sizes, and color schemes. Most Dream Eaters are designed after animals, and each Dream Eater is adorned with an emblem which signifies whether it is a Spirit or Nightmare.
Dream Eaters are characterized by colorful appearances. Nightmares tend to have darker color schemes, while Spirits have lighter, pastel colorations. Nightmares also tend to have round, red eyes which lack pupils, while those of Spirits are either yellow, blue, green or purple. A Spirit's eyes change color as its Disposition changes.
The symbol of the Spirit Dream Eater is present on the back of Riku's third outfit to symbolize his presence inside Sora's dreams, acting like a Dream Eater by vanquishing Nightmares, while the symbol of the Nightmare Dream Eater appears on the visor of Ventus's Keyblade Armor when it is possessed by a Nightmare with Sora inside it.
Dream Eaters exist only within the Realm of Sleep, feeding on the dreams and nightmares of those who sleep. The Nightmare Dream Eaters largely outnumber the Spirits, who only appear in small numbers to assist Sora and Riku.
Dream Eaters react to various forms of treatment, appearing to be happy when they are shown affection. Dream Eaters are able to share power with one another and with other beings in a variety of ways. Sora can utilize his companions in a combination attack, while Riku is able to harness their power to perform stronger attacks.
Each Spirit Dream Eater will have one of four Dispositions, unique to their species, and these Dispositions can be altered by boosting Affinity with the Spirits, or feeding it specific treats. After a Dream Eater's Disposition changes, its eyes change color, it utilizes different attacks and spells in a battle, and a new path may be formed on its Ability Link board.
List of Dream Eaters
Spirits and Nightmares