Dream CollectorThe Dream Collector lives in a different world/dimension than Yuko Ichihara, Kimihiro Watanuki,Tsubasa Li and Princess Tsubasa. The name of the world where the dream collector works is unspecified but Watanuki and Yuko visited his world once in the series.
In the middle of the series, Watanuki has a "real dream" or "premonitory dream" which which is a dream that becomes reality. Watanuki had unknowingly made a "dream purchase" from both Himawari Kunogi and Shizuka Domeki. Subsequently, Watanuki dreamed that there was a large spirit chasing him (Himawari's dream) and that Doumeki, riding a white horse, saved him by shooting an arrow at the spirit (Shizuka's dream). He initially think that it is Shizuka Domeki but it is later revealed that it is in fact Haruka Domeki , Shizuka's late grandfather. Later on, when Watanuki woke up, Yuko told him that even though it was a dream, it was also real and explained to him that if Haruka hadn't come to save him, Watanuki would have really been killed by the spirit. Watanuki also realises that there is an arrow on the ground beside im and notices that it is the same arrow that Shizuka used to save him in the dream. When Watanuki shows Yuko the arrow, Yuko insists that they go to the "dream collector' and they use the arrow to point out the way to enter the world.
When Yuko and Watanuki arrive in that world, they meet the Dream collector and trade in Watanuki's dream (which is sealed inside the arrow) for six dreams that the Dream Collector had in his possession at the time. Watanuki then tells the dream collector to give one of the six dreams he recieved to Chibi Kitsune as thanks for helping him in the Monster Procession. The Dream Collector looks that this act of kindness and tells Watanuki that he has a very rare dream, just like his heart and then he leaves to continue on doing his job.
JobThe Dream Collector's main job is to go around collecting both dreams and nightmare that people have. He transfers these dreams into balloons and takes care of them, nurtures them and then sells them for a higher price. As the Dream Collector said, it may take years to nurture a dream properly. When the collector sells the dreams, the person who bought the dream must tie the balloon down near their bed and that night, they will experience the dream that is inside the balloon. the next morning, the balloon will appear popped and disinflated with various holes through it.
The Dream Collector has a good eye for valuable dreams, instantly identifying the dream fragment (the arrow shot by Haruka) that Watanuki had as an exceptional one. Notably, the dream shone significantly brighter than any of the others. It can be surmised that the Dream Collector sets the selling price very high, as Yuuko and later Watanuki (in the OVA xxxHolic: Rou Adayume) are known to have ruthlessly haggled the price down to the "proper price". This can be seen by how the Dream Collector originally wanted to exchange the arrow for two good dreams, but after Yuuko's haggling ended up trading it for a total of six dreams.