Action conflicts and contrasts with stasis, isolation conflicts and contrasts with cooperation, awareness conflicts and contrasts with belief. These seem to be the central conflicts of the story.
George Orr dreams "effective" dreams that are capable of altering reality, down to past events and people's memories of them. Orr gets new memories, but, unlike everyone else, he retains the old memories, until eventually his recollections have become a vast catalogue of alternate realities. A psychiatrist named William Haber begins controlling Orr's dreams, and thus reality itself, through hypnotic suggestion.
A quote from Chuang Tse in chapter three neatly encapsulates much of the book; "Those whom heaven helps we call the sons of heaven. They do not learn this by learning. They do not work it by working. They do not reason it by using reason. To let understanding stop at what cannot be understood is a high attainment. Those who cannot do it will be destroyed by the lathe of heaven."
Orr's various unremarkable characteristics, his strange ordinariness, about which Haber at one point says, "You cancel out so thoroughly that, in a sense, nothing is left," seem related to his being what an alien species in the book refers to as an iahklu, what the aliens call someone with the ability to alter reality with their dreams. Haber, on the other hand, is filled with the desire to change the world for the better, and is also possessed by what Orr refers to in his own mind as a "will to power."
One of the fine qualities of this book is that it refrains from demonising either perspective. Orr's poorly controlled or completely uncontrolled dreams can lead to bad things, like the death of his aunt or an alien invasion. Dreaming from the suggestions of Haber, Orr makes a world where the government slogan is, "The greatest good for the greatest number," and indeed wars and unhealthy living conditions are gradually reduced by drastic degrees. There generally seems to be a trade-off; racial disharmony is deleted by simply giving everyone grey skin, wars are diverted among humans by the globally shared threat of the invading aliens. Fortunately, the book allows Haber the valid point of saying that these trade offs are the fault of Orr's imagination interpreting Haber's entirely positive suggestions.
If there is any flaw in this book, I would say it's in its ending, which is a little abrupt and a little too rosy (that latter point is probably just me, and it's probably well for most people I didn't write this book). But I think it's interesting to ask oneself who is really destroyed by the lathe of heaven. The ending suggests that it's Haber, though I found the phrase far more interesting in how it related to Orr's relationship with Heather Lelache.
Early in the book, Haber's unwilling to admit to Orr that he knows he's changing reality with Orr's dreams. So Orr hires Lelache, a lawyer, to observe a session, ostensibly because he wishes to see if there's a case against Haber for misusing a patient, but I suspect it's more because of the vertigo Orr feels from being exposed to so many different realities without anyone else acknowledging the truth. The scene where Lelache says she believes him knocked my socks off;
"How do you live with this going on all the time? How do you know where anything is?"
"I don't," Orr said. "I get all mixed up. If it's meant to happen at all it isn't meant to happen so often. It's too much. I can't tell any more whether I'm insane or just can't handle all the conflicting information. I . . . It . . . You mean you really believe me?"