Daydreaming, meditation, intoxication, sleep, and hypnosis are all types of altered states of consciousness.
It means that you are conscious, at least to a certain degree, but definitely not completely conscious of what you are doing or your surroundings (especially during sleep or intoxication). Usually, you aren't really self-aware or self-absorbed during these moments, and you are definitely not waking (which were other options for this question).