Translation:In his dream, the penguin flies to Africa.
why is this in his dream, rather than in the dream? Where is "his" implied?
It could also mean "In the dream...". German often uses an article instead of a possessive pronoun where the context makes it clear, so "In his (the penguin's) dream..." is one possible interpretation, and possibly the first one a native German would think of.
So this would specifically be referring to the penguin's dream, rather than, say, the dream of a man that had been mentioned in a previous sentence?
Im Traum is a bit idiomatic, it roughly means something like dreaming, but to translate it well, you need the context. I think Duo's version is not bad here.