The hippocampus is a sub-cortical brain structure that plays a critical role in laying down new memories. However, brain-imaging studies have shown heightened activations taking place in the hippocampus, not only when we are recalling memories, but also when we are daydreaming, which may constitute creating new memories.
For approximately 30% of our waking hours, we tend to drift off and our minds turn on a "default network" in the brain that is composed of a connected web of brain regions that we use when our mind shifts gears from "concentrate" to "wonder."
The unbridled excursions we take while daydreaming have multiple purposes. It is during these imaginative moments that we:
(1) tend to stretch the current boundaries of reality to new dimensions
(2) mentally rehearse future events
(3) tackle real or imagined challenges, a.k.a. “problem-solving.”
The evolutionary value of a complex creative human memory system rests not so much in our ability to store information, but in our capacities to use that information to predict future events and to imaginatively "create our own future."
Without a flexible and imaginative memory system, predictions, and planning our actions/reactions would linger just beyond our cognitive reach.