A nightmare is a monster in Club Penguin that effects Club Penguin in a way. ~Under construction~
Nightmares are usually spotted by warriors. They're mostly seen in strange worlds, which is their "sweet home". Mostly, the nightmares were created by Mortem to help destroy Club Penguin. Most nightmares stay in their world, they mostly don't want to be seen in public for a reason. Nightmares appearing in Club Penguin happens a little, if warriors spot nightmares in Club Penguin, that means this nightmare got out of their world so they can actually destroy Club Penguin.
All of these nightmares have a element (stress, anxiety, depression, etc). Their element is mostly used to attack other penguins and make them die from those sick feelings.
Most penguin villains have a nightmare form, like Ivy's nightmare form, "Hedera". Those nightmares either reveals their meaning of their name, reveals their biggest "sick feeling", or their biggest fear. If a warrior defeats a nightmare that was a penguin villain in disguise, the villain turns into a normal penguin that's no longer a villain anymore, but sadly they lose most of their memory (fun times, bad times, friends, etc).