In order to recognize that you are dreaming, you need first of all to have a concept of what dreaming is. What happens when you “realize you are dreaming” will depend upon what you understand “dreaming” to be.
Stage 1) Ordinary, non-lucid dreams: dreams are not distinguished from waking life.
Stage 2) Out-of-body experiences: you find yourself in a sort of a mental body floating around in what seems to be the physical world.
Stage 3) Fully lucid dreaming: the dreamer realizes that the experience is entirely mental and that the dream world is completely distinct from the physical world.
Potential for Lucid Dreaming
There are two essential requirements for learning lucid dreaming: motivation and good dream recall. The necessity of motivation: lucid dreaming demands considerable control of attention, and hence we must be motivated to exert the necessary effort. And, if we can remember some dreams, then we can remember lucid dreams.