There's a great article in National Geographic online that poses the question, "Why Do Babies Twitch in Their Sleep?". Most parents assume (myself included) that it has something to do with dreaming, but new research is showing that it's more about developing a brand-new nervous system.
"...these sleep twitches actually have an indespensible purpose: to teach a newborn what all of its limbs and muscles can do, and how to use them in concert to interact with the big, wide world."
Why Do Babies Twitch in Their Sleep? (Adorable Video Edition) | NationalGeographic.com