Fantasy in a psychological sense refers to two different possible aspects of the mind, the conscious, and the unconscious. In the unconscious sense, it is sometimes spelled "phantasy".
A fantasy is a situation imagined by an individual that expresses certain desires or aims on the part of its creator. Fantasies sometimes involve situations that are highly unlikely; or they may be quite realistic. Fantasies can also be sexual in nature. Another, more basic meaning of fantasy is something which is not 'real,' as in perceived explicitly by any of the senses, but exists as an imagined situation of object to subject.
In everyday life, individuals often find their thoughts pursue a series of fantasies concerning things they wish they could do or wish they had done...fantasies of control or of sovereign choice...daydreams'.
George Eman Vaillant in his study of defence mechanisms took as a central example of 'an immature defence...fantasy — living in a "Walter Mitty" dream world where you imagine you are successful and popular, instead of making real efforts to make friends and succeed at a job'. Fantasy, when pushed to the extreme, is a common trait of narcissistic personality disorder; and certainly 'Vaillant found that not one person who used fantasy a lot had any close friends'.
Other researchers and theorists find that fantasy has beneficial elements — providing 'small regressions and compensatory wish fulfilments which are recuperative in effect'. Research by Deirdre Barrett reports that people differ radically in the vividness, as well as frequency of fantasy, and that those who have the most elaborately developed fantasy life are often the people who make productive use of their imaginations in art, literature, or by being especially creative and innovative in more traditional professions.
Freud and daydreams
A similarly positive view of fantasy was taken by Sigmund Freud who considered fantasy (German: Fantasie) a defence mechanism. He considered that men and women "cannot subsist on the scanty satisfaction which they can extort from reality. 'We simply cannot do without auxiliary constructions,' as Theodor Fontane once said ... [without] dwelling on imaginary wish fulfillments." As childhood adaptation to the reality principle developed, so too 'one species of thought activity was split off; it was kept free from reality-testing and remained subordinated to the pleasure principle alone. This activity is fantasying...continued as day-dreaming. He compared such phantasising to the way a 'nature reserve preserves its original state where everything...including what is useless and even what is noxious, can grow and proliferate there as it pleases'.
Daydreams for Freud were thus a valuable resource. "These day-dreams are cathected with a large amount of interest; they are carefully cherished by the subject and usually concealed with a great deal of sensitivity ... such phantasies may be unconscious just as well as conscious." He considered "These phantasies include a great deal of the true constitutional essence of the subject's personality" and that the energetic man "is one who succeeds by his efforts in turning his wishful phantasies into reality," whereas the artist "can transform his phantasies into artistic creations instead of into symptoms ... the doom of neurosis."
In the context of occurences of the mental disorder known as schizophrenia, individuals who exhibit symptoms fulfilling this particular classification might be experiencing fantasies as part of the diagnosis (Shneidman, E. S. 1948). Scientific investigation into activity of the so-called default network within the brain (Randy Buckner et al 2008) has shown individuals diagnosed with schizophrenia have high levels ("...overactive...") of activity within their brains. 
In a study with a small sample size, of eighty individuals diagnosed with schizophrenia, it was found one quarter of men who had committed a contact crime against women were motivated by sexually orientated fantasy (A.D. Smith 2008). 
Klein and unconscious fantasy
Melanie Klein extended Freud's concept of fantasy to cover the developing child's relationship to a world of internal objects. In her thought, this kind of 'play activity inside the person is known as "unconscious fantasy". And these phantasies are often very violent and aggressive. They are different from ordinary day-dreams or "fantasies" (spelled with an "f")'.
The term "fantasy" became a central issue with the development of the Kleinian group as a distinctive strand within the British Psycho-Analytical Society, and was at the heart of the so-called Controversial discussions of the wartime years. 'A paper by Susan Isaacs (1952) on "The nature and function of Phantasy"...has been generally accepted by the Klein group in London as a fundamental statement of their position'. As a defining feature, 'Kleinian psychoanalysts regard the unconscious as made up of phantasies of relations with objects. These are thought of as primary and innate, and as the mental representations of instincts...the psychological equivalents in the mind of defence mechanisms'.
Isaacs considered that 'Unconscious phantasies exert a continuous influence throughout life, both in normal and neurotic people, the difference lying in the specific character of the dominant phantasies'; Most schools of psychoanalytic thought would now accept that 'Both in analysis and life, we perceive reality through a veil of unconscious fantasy'. Isaacs however claimed that 'Freud's "hallucinatory wish-fulfilment" and his.."introjection" and "projection" are the basis of the fantasy life'; and how far unconscious fantasy was a genuine development of Freud's ideas, how far it represented the formation of a new psychoanalytic paradigm, is perhaps the key question of the Controversial discussions.
Lacan, fantasy, and desire
Lacan engaged from early on with 'the phantasies revealed by Melanie Klein...the imago of the mother...this shadow of the bad internal objects' — with the Imaginary. Increasingly, however, it was Freud's idea of fantasy as a kind of 'screen-memory, representing something of more importance with which it was in some way connected' that was for him of greater importance. Lacan came to believe that 'the phantasy is never anything more than the screen that conceals something quite primary, something determinate in the function of repetition'.
Phantasies thus both link to and block off the individual's unconscious, his kernel or real core: ' subject and real are to be situated on either side of the split, in the resistance of the phantasy ', which thus comes close to the centre of the individual's personality and its splits and conflicts. 'The subject situates himself as determined by the phantasy...whether in the dream or in any of the more or less well-developed forms of day-dreaming'; and as a rule 'a subject's fantasies are close variations on a single theme...the "fundamental fantasy"...minimizing the variations in meaning which might otherwise cause a problem for desire'.
The goal of therapy thus became ' la traversee du fantasme, the crossing over, traversal, or traversing of the fundamental fantasy'. For Lacan, 'The traversing of fantasy involves the subject's assumption of a new position with respect to the Other as language and the Other as desire...a utopian moment beyond neurosis'. The question he was left with was 'What, then, does he who has passed through the experience...who has traversed the radical phantasy...become?'.
The fantasy principle
The postmodern intersubjectivity of the 21st century has seen a new interest in fantasy as a form of interpersonal communication. Here, we are told, 'We need to go beyond the pleasure principle, the reality principle, and repetition compulsion to...the fantasy principle ' - 'not, as Freud did, reduce fantasies to wishes...[but consider] all other imaginable emotions'; and thus envisage emotional fantasies as a possible means of moving beyond stereotypes to more nuanced forms of personal and social relating.
Such a perspective 'sees emotions as central to developing fantasies about each other that are not determined by collective "typifications"'.
Narcissistic personality disorder
- A pervasive pattern of grandiosity (in fantasy or behavior)
- A preoccupation with fantasies of unlimited success, power, brilliance, beauty, or ideal love.
- Erik H. Erikson, Childhood and Society (Middlesex 1973) p. 183
- Robin Skynner/John Cleese, Life and how to survive it (London 1994) pp. 53–4
- Skynner/Cleese, p. 54
- Otto Fenichel, The Psychoanalytic Theory of Neurosis (London 1946) p. 554
- Barrett, Deirdre Fantasizers and Dissociaters: An Empirically based schema of two types of deep trance subjects. Psychological Reports, 1992, 71, p. 1011 1014; Barrett, Deirdre L. Dissociaters, Fantasizers, and their Relation to Hypnotizability in Barrett, Deirdre (Ed.) Hypnosis and Hypnotherapy, (2 vol.): Vol. 1: History, theory and general research, Vol. 2: Psychotherapy research and applications, NY, NY: Praeger/Greenwood, 2010.
- Sigmund Freud, Introductory Lectures on Psycho-Analysis (Penguin Freud Library 1) p. 419
- Sigmund Freud, On Metapsychology (Penguin Freud Library 11) p. 39
- Freud, Introductory p. 419
- Sigmund Freud, On Psychopatholgy (Penguin Freud Library 100 p. 88
- Sigmund Freud, Five Lectures on Psycho-Analysis (London 1995) p. 81
- Shneidman, E. S. (1948) - Schizophrenia and the MAPS test: a study of certain formal psycho-social aspects of fantasy production in schizophrenia as revealed by performance on the Make A Picture Story (MAPS) test. Genetic Psychology Monographs, 38, 145-223. American Psychological Association Accessed November 19th, 2017
- SB Kaufmann (2009), (Josie Glausiusz 2009) -  Psychology Today Accessed November 19th, 2017
- Buckner RL, Andrews-Hanna JR, Schacter DL. (2008) & Buckner Laboratory The brain's default network: anatomy, function, and relevance to disease. Ann N Y Acad Sci. 2008 Mar;1124:1-38 doi: 10.1196/annals.1440.011 Retrieved November 19th, 2017
- Alan D. Smith (04 Jan 2008) - Aggressive sexual fantasy in men with schizophrenia who commit contact sex offences against women The Journal of Forensic Psychiatry Volume 10, 1999 Accessed November 19th, 2017
- Robert Hinshelwood and Susan Robinson, Introducing Melanie Klein, (Cambridge 2006) p. 100
- R. D. Laing, Self and Others (Middlesex 1969) p. 17 and note
- Hinshelwood/Robinson, Introducing p. 174
- Quoted in Laing, p. 19
- Janet Malcolm, Psychoanalysis: the Impossible Profession (London 1988) p. 76
- Quoted in Laing, p. 18
- Jacques Lacan, Ecrits: A Selection (London 1997) p. 284 and p. 21
- Sigmund Freud, Case Histories II (Penguin Freud Library 9) p. 328
- Jacques Lacan, The Four Fundamental Concepts of Psycho-Analysis (London 1994) p. 60
- F. Wahl, in Lacan, Four p. 89
- Lacan Four p. 185
- Phillip Hill, Lacan for Beginners (London 1997) p. 75
- Bruce Fink, The Lacanian Subject: Between Language and Jouissance (Princeton 1997) p. 61
- Fink p. 62 and p. 72
- Lacan, Four p. 273
- Michael Vannoy Adams 1996 (The Multicultural Imagination: Race, Color, and the Unconscious), quoted in Dawn Freshwater and Chris Robertson, Emotions and Needs (Buckingham 2002) p. 43
- Freshwater/robertson, p. 43
- Narcissistic personality disorder Archived 2010-01-08 at the Wayback Machine.
- Michael Vannoy Adams, The fantasy principle: psychoanalysis of the imagination (East Sussex 2004)
- Julia Segal, Phantasies in Everyday Life (1995)
- Riccardo Steiner ed., Unconscious fantasy (Karnac 2003)
- G. Vaillant, Adaptation to Life (Boston 1977)
- The dictionary definition of fantasy at Wiktionary