Although they were corporeal, they used technology to exist in a collective dream state. They broadcast this collective dream into the surrounding space and used it to trap starship crews in a shared dream. While this dream state appeared to be simple sleep based on analysis by the Doctor, he was incapable of waking any of the affected victims up using artificial means such as drugs or external stimulants, although he was able to provide drugs to keep the crew awake so they wouldn't be trapped in the dream. Once they were all asleep, the crews eventually perished as their bodies lacked consumption of food and water. This seemed to be a defensive measure although it may have been a method of attack, as the species claimed to be acting in their own defense against 'waking species'.
The species (or at least a group of them) were found as hundreds of sleeping bodies in a cavern on a planet, which contained a machine that created a neurogenic field that allowed the dream state to exist.
The race was encountered in 2374 by the USS Voyager, trapping the crew in their nightmares, but was defeated by Commander Chakotay, who had unusual command of his dream using a technique called lucid dreaming, allowing him to plant a "trigger" in his mind where his subconscious would include Earth's moon in his dream, allowing him to realize that he was dreaming and wake himself up. With this method – and the aid of the Doctor, who, as a hologram, never slept anyway – Chakotay was able to stay awake long enough to locate the sleeping aliens in a cavern on a planet by tracking the energy field they created to maintain their dream. With The Doctor ordered to launch a photon torpedo at the cavern if Chakotay didn't respond, Chakotay was able to fall asleep and confront the aliens, forcing them to dismantle the transmitter that the aliens used for their dream attacks and end the crew's nightmares before The Doctor destroyed their physical bodies. (VOY: "Waking Moments")