Scientists have show that when rats sleep, they play back memories as much as seven times faster than the events really transpired. The research, conducted at the University of Arizona, may shed light on how memories are processed. From a University of Arizona press release:
Memory stores patterns of activity in modular form in the brain's cortex. Different modules in the cortex process different kinds of information – sounds, sights, tastes, smells, etc. The cortex sends these networks of activity to a region called the hippocampus. The hippocampus then creates and assigns a tag, a kind of temporary bar code, that is unique to every memory and sends that signal back to the cortex.
Each module in the cortex uses the tag to retrieve its own part of the activity. A memory of having lunch, for example, would involve a number of modules, each of which might record where the diner sat, what was served, the noise level in the restaurant or the financial transaction to pay for the meal.
But while an actual dining experience might have taken up an hour of actual time, replaying the memory of it would only take 8 to 10 minutes. The reason, (professor Bruce) McNaughton said, is that the speed of the consolidation process isn't constrained by the real world physical laws that regulate activity in time and space.
The brain uses this biological trick because there is no way for all of its neurons to connect with and interact with every other neuron. It is still an expensive task for the hippocampus to make all of those connections. The retrieval tags the hippocampus generates are only temporary until the cortex can carry a given memory on its own.