This unsettling episode follows in the mold of season 5's "Schisms". Data has a series of unsettling nightmares - intimations of something gone terribly wrong.
Like "Schisms", the writers are willing to play with the audience expectations - there is plenty of humor here, not all of which I remember offhand but includes Data's hilarious pre-nap ritual. The scene where Data stabs Troi is pretty much the highlight of the episode - the kind of thing that will probably shake a viewer out of their complacency.
That said, I have the same beef with this episode that I had with season 6's "Timescape" - the underlying explanation for what's happened seems very generic for TNG. "Schisms" had a much more satisfying resolution.