This seems to get a lot of people. tidus' zanarkand did exist 1000yrs ago, but was destroyed by sin. the fayth then recreated this zanarkand but only in a dream, while the rest of spira continued living. 1000yrs into the dream, sin appeared and took tidus from the dream world into the real world. sort of like an alternate timeline, the drfeam zanarkand would have been the present day had sin not destroyed it.