In summary, Joseph Smith dreamed that he and his brother Hyrum Smith were aboard a steamboat which caught fire. They jumped overboard, and decided to try walking on the water as a manifestation of their faith. Initially sinking, they did subsequently exercise enough faith to begin walking on top of the water. After a short period, Joseph and Hyrum were joined by their brother Samuel. After a while, all three sighted a glorious image -- the image of their departed friends, loved ones, and the Savior Himself in the spirit world. Watch the video below:
The account on the video is abridged; the full text is available on Seth Adam Smith's blog.
The Interpretation: From my perspective, considering that Joseph Smith had the dream just a short time before his death, it seems like the dream did foreshadow the imminent death of Joseph, Hyrum, and Samuel Smith, along with the fact that their calling and election had been made sure, and they had been sealed up unto exaltation. So why did Samuel Smith not join them in the dream until midway? The dates of their deaths may explain this. While both Joseph and Hyrum Smith died on June 27th, 1844, Samuel Smith did not die until July 30th of the same year. Thus the dream also foreshadowed the later death of Samuel Smith.
According to the full text, after Joseph Smith awoke from the dream, he then fell asleep again, during which he had another dream. In this second dream, he saw "William and Wilson Law endeavoring to escape from the wild beasts of the forest, but two lions rushed out of a thicket and devoured them". This seemed to foreshadow the fact that William Law, who had already apostasized and was excommunicated, would never return to the LDS Church. Wilson Law also apostasized. Their plans to take down the Church would fail.
In this separate post, Seth Adam Smith also puts forth his possible interpretation. He also believes the dream foreshadows their martyrdom. He opines that the water often symbolizes chaos, doubt, sin, confusion, death and fear, and the fact that Joseph and Hyrum are walking on the water is significant because it indicates that they have conquered life through their faith in God.
So why was Joseph Smith given this dream? In June 1844, he had been feeling strong premonitions of his impending death. At about midnight early on June 23rd, he and his brother Hyrum left Nauvoo for Iowa, intending to go to the Rocky Mountains. However, he learned that some of his friends back in Nauvoo were accusing him of cowardice for leaving them, so the dream was given to him to buck up his courage. As a result, he returned to Nauvoo -- and to subsequent martyrdom.
Seth Adam Smith says he doesn't know for certain if the account is true. However, for him, whether or not it's true doesn't make much difference. At the end of the day, his faith does not rest on the possible last dream of a Prophet, but on the reality of his First Vision.
Seth Adam Smith also posts an unofficial video response from retired Church history instructor (NOT "the" Church Historian) Paul Thomas Smith HERE; he believes it to be authentic.
Seth also recommends reading a lengthy analysis by Ardis Parshall, who makes an important statement:
I am wary of appeals to emotion (as Seth’s video, with its powerful music and dramatic narration, certainly is) that replace rational thought and prayerful consideration. I am wary of people’s uncritical acceptance of old documents produced as the latest new thing and presented without adequate study...
I don’t call for automatic dismissal; I do maintain that people who aren’t more careful about what they accept as truth are in danger of being tossed to and fro with every wind of doctrine, and build their houses on what too often turns out to be sand.
A Well-Behaved Mormon Woman also weighs in on this subject, as well as LDS Media Talk and Meridian Magazine.