Nominally, The Sandman takes place in the DC Universe, largely operating independently of the superhero sections of the universe to instead explore the strange, unexpected, and occasionally horrific.
In The Sandman #6, Neil Gaiman, Mike Dringenberg, Malcolm Jones III, Daniel Vozzo, and Todd Klein pushed that connection to the limit by transforming John Dee/Doctor Destiny from a forgettable Silver Age villain to a world-threatening and nightmare-inducing monster.
How The Sandman Changed Doctor Destiny
In his original incarnation, Doctor Destiny was a mysterious scientist who created various tools and gadgets to try and defeat the Justice League starting with Gardner Fox and Mike Sekowsky's Justice League of America #5 in 1961. Among these were his Materioptikons, devices that could affect the dreams of others and draw these nightmares into the real world. Based on a particularly powerful item and its power -- a strange crimson gem -- these machines could turn the visions seen within people's dreams into living things composed of matter. However, after going up against the Justice League multiple times, the heroes decided to try and defeat Dee once and for all, breaking his ability to dream and leaving the villain a shriveled, decrypt man. He was brought to Arkham and locked away for years, and largely forgotten until the events of The Sandman.
However, The Sandman revealed that the crimson ruby Doctor Destiny -- real name John Dee -- had used was the original Materiotinkon, otherwise known as the Dream Stone. The artifact belonged to Morpheus, Dream of the Endless. Nearly a century before the modern-day, Roderick Burgess and his Order of Ancient Mysteries accidentally captured Morpheus in a binding spell meant for his sister, Death. Burgess and his allies stole away many of Dream's tools. This included Burgess' former mistress, Ethel Cripps, who made off with the Materioptkons, as well as the protective charm of her criminal partner. She ended up giving gem to her son, John, and parting with the charm just before her death. This allowed Dee to escape Arkham and hunt down the Materiotinkon before a released Dream was able to properly take it back.
What Happens After John Dee/Doctor Destiny Gets the Gem?
Reclaiming the Materioptikons, Dee made his way to a diner and waited as the gem went to work, dragging the nightmares of all beings into the real world and unleashing madness made flesh against humanity. Anyone who sleeps is woken by horrifying nightmares, and a children's show host cuts his wrist on live-television. As his madness spreads and religious leaders begin calling the events doomsday, Doctor Destiny watches from the coffee shop. He even takes time to mess with the minds and dreams of the others in the coffee shop, slowly driving them mad and forcing them to mutilate themselves in his presence. Doctor Destiny transforms from a minor villain into DC's answer of Freddy Krueger, given a god-complex and a commitment to destroy the entire world and drag it into darkness.
Within a day, the world is practically on fire, and all the other patrons of the diner -- driven mad and forced to kill each other and themselves -- have been wiped out. Doctor Destiny instead waits for the arrival of Morpheus, who could potentially even entertain him some more. After vowing to kill Dream and take control of the Realm of Dreaming for himself, Doctor Destiny ventures into the otherworld and tries to confront Morpheus, bringing pain and chaos to the dreamers of the world. Eventually turning the Dream Stone against Morpheus, Dee seems to obliterate the ancient being. But in reality, the effort released the full power of Dream that had been held within the gem and restored Dream to his full power.
With a single story, Doctor Destiny/John Dee went from being a goofy Silver Age-style villain to a global threat. But John Dee's role in Sandman is far more frightening for how chaotic and cruel his madness becomes. Spreading it into the world leads men to murder their sons and women to gouge out their eyes -- just because he was bored. In his appearance, he's more like something akin to the Crypt-Keeper than a traditional Justice League villain. Even this is driven on by pure madness, which is why Dream shows him a speck of forgiveness, merely returning him to Arkham and returning his ability to dream. It's a fantastic show of the power present in The Sandman and elevates John Dee/Doctor Destiny into one of the most frightening figures in DC history.