A question that has puzzled me for a while since playing the PS4 Remaster...

As I understand it (even though it's never really explained in the game and was added into the Ultimania), Dream Zanarkand and its inhabitants are a physical entity on Spira out on the sea near Baaj Temple. It's being summoned by Yu-Yevon like an Aeon, with the fayth to the summoning being our chums at the top of Gagazet.

Sin is the creature created by Yu-Yevon to protect him and defend Dream Zanarkand, and attack civilisations around Spira to make sure they don't advance far enough to discover the city.

So why does Sin attack and destroy it at the beginning of the game?