It is formed totally from Dreamsand and travels the earth along the Equator, chasing the sunset.
The Sandship spreads Dreamsand like it's master, but it cannot create Dreams of power like Sandy can so it merely gives dreams of say money, flying or being a pop-star. It gives Dreams that can fight Nightmares of any kind, real or imagined.
The Sandship was originally the Island of the Sleepy Sands. The Island was formed when the shooting star that Sandy rode across space crashed into Earth. On it Sandy slept for many years until he awoke from his eons slumber by the Man in the Moon who told him that despite the defeat of Pitch Black, the Boogeyman, The Nightmare King, captian of the Nightmare Galleon, a grisly black pirate ship, his minions, the Fearlings, Nightmare Men, Dream Pirates, Nightmares, Shadows and Darklings still roamed the night now in search of sleeping children and their innocent dreams to hazard . Afterwards Sandy, the Sandman, become restless and anxious until the fellow sea creatures and mermaids calmed him and made him dream. When he did, a ship was formed from the Island and Sandy rode it as a cloud across the Heavens and Earth to help the children and protect their good dreams from nightmares.