Okay now that I have watched " Flashes Before Your Eyes" again , here is what I Think --
Desmond was Definately Dreaming !!
Typically, when a character on Lost has their "flashbacks", they are awake, interacting with others, in the middle of doing things, and otherwise cognizant of what is going on around them. They're almost daydreaming about the past, seemingly inspired by things that are currently happening on the Island (when the writing is good and the flashbacks don't seem forced, that is)
On the other hand, Desmond's flashback occurred while he was seemingly unconscious (aka “dreaming”) from the blast of the Hatch, between the time when he turned the Failsafe Key and the moment he woke up in the jungle outside... and this might help explain the difference between the two.
Thats why i think Desmond was just dreaming, not having a “flashback” like everyone else on the Island has. His life “flashed before his eyes” and he tried to change it, but realized that the Island was his fate. No matter what he tried to do, this is where he was supposed to end up. Once again, fate controls all.
Ms. Hawking
Ms. Hawking knows very specific details about Desmond’s future, as well as his intentions to try and change it.
If Desmond is really time traveling, how do you explain that? Is she an agent of Dharma that can also time travel and is trying to prevent Desmond from changing things? I think that’s a little too far out there, even for someone who just made logical arguments supporting the possibility of time travel. No way. Desmond’s assumption that she is his conscience is much more plausible imo.
What about all the Island Items that we saw in Desmond’s past ?
The 1:08 Clock.
The Beeping Microwave.
The Polar Bear / Buddha / Namaste Picture.
One note about this – at first it looks like the word “Namaste” is written backwards, which is kinda creepy – and that the picture disappears after we initially see it
But actually, what we are originally seeing is the reflection of the picture in a mirror on Desmond’s right side (thus, the backward word), and the real picture is on his left side --
If you think about it, these are the strongest indications that Desmond was indeed dreaming, and not time traveling. Sure, you could chalk up the items up to coincidence, foreshadowing, or even a Widmore-Dharma connection, but the much more reasonable explanation is that they were just random images that his mind was inserting into his dream. Scientists have found that people often interpolate items from their day-to-day life into dreams in very strange and unexplainable ways.
So, after thinking through both theories and comparing the facts – I think the answer is that the events we saw during “Flashes Before Your Eyes” were just that – Desmond’s life flashing before his eyes in a dream. However, the events that we didn’t see – the future events that also “flashed before his eyes” seem to indicate that Desmond has gained some sort of “future seeing” power from the Island. So in a way, everyone wins.
One More thing there is one glaring issue with looking at the pictures too closely --
Season 2
Season 3

As you can see the girl in the picture has changed over the seasons.
But Before we analyze too much maybe when we first saw the picture, the actress for Penny had not yet been cast – thus the difference between the picture we saw inside the Hatch at the start of Season Two, and the picture that Desmond currently has.
Also Dont forget to watch This weeks Lost -- "Stranger in a Strange Land"
http://www.youtube.com/v/6E5cc1kG8eQ
3 Major mysteries of LOST are gonna be revelaed.
> What happened to the Kidnapped Children.
>What happened to Cindy.
>What does Jackz Tatoo mean
Oh .. and before i leave , we can now create a High stakes event on
FE predicting which character from LOST is gonna Die Next , here are the odds