Q:

Why doesn't my android start daydreaming? 

In Settings > Display > Daydream I have
- selected one (any one, but right now it's just the standard Clock)
- when to daydream = either docked or charging
- "start now" works fine. 
I've connected my Nexus 4 by USB cable to a wall charger and "Clock" confirms Charging (AC), 45%
Settings > Display > Sleep is set to 15 seconds while I try to get daydreaming to work.  If/when it works, I'll probably set it to 2 minutes. 
Despite the above settings, and being on AC power, the phone never daydreams.  Why not? 
This is a Nexus 4 with stock 4.2.2, not rooted, not superuser'ed (yet). 

A:

As mentioned in comments, I also have a Nexus 4 (4.2.2) and it daydreams OK when charging (USB to wall charger) when set to sleep after 15 seconds. 
"Daydreaming" is triggered when the device goes to sleep (or when sleep mode would normally be triggered).  It would seem that if the "stay awake" option is checked in "Developer options" then sleep mode is never triggered and the device never daydreams.  So, the solution is to uncheck the "stay awake" option. 
"Daydream" is like a conditional stay-awake option.  The screen does not switch off and for this reason a device can only be set to daydream when it is connected to a power source. 

A:

Daydream doesn't trigger if Phone is switched off by button.