The Black Mercy is parasitic alien flora. It paralyzes its victim. Feeds off psychic energy created by inducing a...calling it a "dream state" is wrong. It is a reality. 
History
Black Mercy is a plant that creates a dream of a person's perfect life by tapping into the pleasure centers of a person's brain, while keeping the victim totally paralyzed. Black Mercy feeds on the psychic energy produced by the victim's interaction with his/her "dream". They are harvested by Mongul, and have been seen to be used on Hal Jordan[1], Oliver Queen[1], Clark Kent, Kara Danvers, Bruce Wayne, Stephanie Brown[2], Arthur Curry[3] and even Mongul himself.
Modified versions of the Black Mercy (created either using Fear radiation or of a red discoloration) were developed to instead trap victims in horrific nightmares. These were conceived of by by the son of an infamous tyrant; Mongul II using a Yellow Power Ring's fear energy to change their genealogical structure using Fear energy.[4] An alien craft attempting to smuggle a cargo full of Red Mercies to earth ran into trouble when one of the plants attached itself to the pilot.[5]
When someone discovers the Black Mercy-created reality is fake (they notice something wrong, or otherwise realize their lives aren't this perfect), the Black Mercy will slowly lose its grip on its host, making it easier to detach from them.
Another variation of the plant created by Mongul was called the Golden Fury, which breeds and pollinates bright yellow spores that spread out and ramp up aggressive mindsets in everyone whom inhales them. This also makes those who're affected by which more compliant to another's influence.[6]
Worlds
Superman: His father Jor-El's prediction was proven untrue. He is married to Lyla Lerrol a composite of Lois Lane and Lana Lang, and has two children Orna-El and Van-El. In the midst of this, Krypton is going through a political upheaval; his cousin is attacked by anti-Phantom Zone protesters.[7]
Batman: In this dream, the murder of young Bruce's parents is foiled. He grows up and has a wife, Kathy Kane, and a teenage daughter.[7]
Mongul: Mongul kills the people he is fighting -- Hawkman, Hawkwoman, Martian Manhunter, Adam Strange, Hyathis, Bolphunga and Brainiac -- and goes on to conquer the universe.[7]
Green Lantern: Hal's father never died, nor did his mother, and his family is happy together. Hal is also dating his high school sweetheart Jen. Coast City was never destroyed; Sinestro never turned evil, and is his mentor and friend. They show the Green Lantern Corps fighting an unknown man possessed by Parallax.
Green Arrow: Ollie is married to Sandra Hawke and has a great relationship with his son, Connor Hawke (who is a hero at least similar to Speedy). He has at least three kids, and his identity is publicly known.
Unknown: He is Superman.
Unknown: A family man.
Unknown: Won the Lottery.
Batgirl: Steph remains a successful hero, graduates from college, fights various criminals alongside the Teen Titans, is temporarily inducted into the Blue Lantern Corps, has a son, and moves on to take up the mantle of Nightwing while Nell Little becomes the new Batgirl studying under her.
Flaw
The worlds are temporary, and people always break free, either from the plants losing their grip, or the people under its thrall realizing the nature of the charade. When Hal Jordan and Oliver Queen were trapped by the same plant, Hal's greater strength of will caused him to control the illusion, with the result that the plant showed Oliver what Hal believed would be his friend's perfect life rather than what Oliver himself would have wished for.
Notes
- The Black Mercy plant appears in the Justice League Unlimited episode "For the Man Who Has Everything", which is based on the Superman Annual #11 story of the same name.
- The Black Mercy appears in the Supergirl episode "For the Girl Who Has Everything", partly named after Superman Annual #11. However, the Black Mercy seems to work in a way opposite to its portrayal in the original comics: the illusion grows stronger over time, instead of growing weaker until the infected eventually realizes they're in an illusion.
- The Black Mercy appears in a glass case in the Fortress of Solitude in several episodes of the Krypton television series, starting with the first episode.