Moonlight Dreams is a small, warm scene of friends sitting outside at night, shoes off, feet in water, talking freely. The speaker remembers it as a place where "anything was possible." Because nobody can hear them except the water, the moon and the stars, they feel safe enough to talk about themselves, politics, and what scares them. The water works as a mirror, so the evening also becomes a moment of looking honestly at themselves.
The last stanza turns playful and a little sharp. The sun is dismissed as "tans and vitamins for teenage barbie dolls," all surface and image, while the moon stands for deeper, stranger thoughts. Those midnight thoughts "disappear in the morning dew," which adds a gentle sadness: the honesty of the night may not survive daylight. The mood is dreamy, relaxed and intimate, with a hint of wistfulness. The speaker seems to value these moments exactly because they are fleeting.