I agree completely with lostinspirits that Earth is school for souls. Souls come here to learn life lessons, then go to another plane to reflect on what they've learned and gain more insight. They spend time there, maybe 100s or even 1000s of years and then when the time is right, decide to come back and learn more lessons. Sometimes souls reincarnate immediately, that is according to a book I'm reading right now called "Indigo Adults" by Jaffe and Davidson, but most wait at least a few generations. The time spent on the other plane is not the same way time exists on earth either, so what be 1000 earth years is only a blink of an eye on that plane. It is all fascinating, and I've often wondered too if this is the "real world." I don't think it is for souls, but it is for human bodies.
Also, I don't know if I mentioned this previously, not only does each soul have a lesson or several to learn on earth, but also a lesson or lessons to teach. For example when a baby dies at a very young age, it's purpose is to teach a lesson to the parents about loss. I remember watching a show with Shirley McClaine where she talked about that. I think it was when she was promoting her book, "Out on a Limb," several years ago on the Oprah Show.
I guess the question then becomes, what is reality?
My friend was told by a psychic that her son is an indigo child. From a very young age(around 3 or 4) he told her that he looked down from heaven and chose his family. She believes he could be her own father reincarnated as he has so many of his personality traits. Her father died about 7 years before her son was born.
I know of a person who does past life regressions in my area, but I haven't worked up the nerve to go have it done. I think I'm just nervous about being hypnotized as I've never done that before. Definitely an interesting subject.