"...the dream Ego does not know that it is dreaming. It does not realize the signals it is turning into an internal narrative are self-generated stimuli--in philosophical jargon, this feature of the dream state is a "metacognitive deficit." The dream Ego is delusional, lacking insight into the nature of the state it is itself generating."
--Thomas Metzinger, The Ego Tunnel, p. 138
In lucid dreaming, this is not the case, for the dreaming Ego is conscious it is dreaming/creating the dream state.