After finding the USS Brattain, a Starfleet vessel that had gone missing, the Enterprise away team beams aboard to discover everyone dead, after having apparently gone insane and killed each other. There is a sole survivor: a Betazoid man in a catatonic state. Troi attempts to communicate with him telepathically while the crew attempts to solve the mystery of what happened to the Brattain. But then the Enterprise becomes stuck and cannot move from its current position, while members of the crew start experiencing hallucinations and unease.
"Night Terrors" initially resembles a ghost story (or, in the Trek world, a weird-alien-presence story). The episode's depiction of a silent and ominous Brattain hints at a catastrophe that must have been initiated by some sort of outside influence. What I like best about "Night Terrors" is that it begins with the strange and surreal and slowly scales it back to more real-world symptoms. The reason the Enterprise is stuck is because of a known energy-draining phenomenon called a Tyken's Rift. And the reason people are hallucinating is because they haven't gotten any REM sleep for many days. The sleep deprivation is causing fatigue among the entire crew that, Crusher reports, will inevitably end in insanity and mass violence.
It's kind of fun seeing the crew so sleep deprived that they're like the walking dead, and the hallucinations make for at least one well-executed creepy image, where Crusher is in a room full of corpses that she suddenly hallucinates as sitting up on their slabs.
Overall, it's an average outing. The way the mystery is solved by Troi and Data requires so many assumptions that one hopes guessing and logic are the same thing. And then there are the lackluster scenes of Troi's dreams (she's the only one who can dream, because she's Betazoid) where she's floating in a green space cloud and yelling at two lights. These visuals look like they were conceived for a flying cartoon superhero. And why can't the aliens who are trying to communicate simply say, "We need hydrogen," rather than concocting riddles about "one moon circling the other"? I know; I'm being a nitpicker.