Have you ever noticed how you can't actually read a clock or check your phone reliably in dreams? That's kind of the key here. Your brain during REM sleep (when most vivid dreaming happens) is doing something wild - it's basically running a narrative without the usual time-keeping mechanisms that keep you anchored to reality. Your prefrontal cortex, which handles logic and time perception, is way less active when you're dreaming. So your brain isn't comparing dream-time to real-time; it's just... playing out events in sequence without that external clock running in the background.
The other thing is that dreams can compress and expand time in ways that feel completely natural while you're in them. You might experience what feels like hours of conversation, travel, problem-solving - all the sensory and emotional details that would normally take time - but your brain is basically fast-forwarding through the "filler" parts. It's not processing every second; it's hitting the emotional and narrative beats. So you get the full experiential weight of a long journey without actually living through the boring parts.
Plus, when you wake up, you're reconstructing the dream from memory, and memory itself is weird about duration. Your brain might be padding the experience with all these details and connections, making it feel richer and longer than it actually was. It's kind of like how a good movie can feel like it flew by, or a boring one feels endless - except in dreams, your brain is both the director and the audience, so it's extra malleable.