My professor asked us this questions.

One has life-like experiences in ones dreams, but is still aware that these experiences are mere appearances and that the reality lies beneath. Nietzsche makes the assumption here that, when dreaming, one is always aware that one is dreaming; those who are entirely caught up in their dreams are not experiencing Apollonian beauty, but rather Dionysian ecstasy.
What is Nietzche saying?

Friedrich Nietzsche, a philosopher known for his views on art, aesthetics, and the human condition, is making a distinction between two contrasting forces in human experience: the Apollonian and the Dionysian.

In this particular passage, Nietzsche is discussing the state of dreaming and its relation to these two forces. The Apollonian represents order, reason, and rationality, while the Dionysian represents chaos, emotion, and ecstasy.

According to Nietzsche, when one dreams, they have life-like experiences, meaning their dreams feel real and vivid. However, he argues that even in these dreams, one is still aware that they are dreaming. This awareness of the dream suggests an Apollonian quality — a recognition that the experiences in the dream are mere appearances, not reality.

On the other hand, Nietzsche suggests that those who are entirely caught up in their dreams, without being aware that they are dreaming, are experiencing Dionysian ecstasy. This entails being completely immersed in the chaotic and emotional aspects of the dream, without the rational detachment of recognizing it as a dream.

Therefore, Nietzsche is proposing that a certain level of self-awareness, the ability to distinguish between dream and reality, is necessary for experiencing the Apollonian beauty. If one is completely consumed by the dream with no awareness, they are experiencing the overwhelming and uncontrolled intensity of the Dionysian.

It's worth noting that Nietzsche used these concepts of the Apollonian and the Dionysian as metaphors for different artistic and existential experiences, examining the tension between rationality and irrationality, order and chaos, throughout his works.