This sounds like a night terror. It's very disturbing to watch, isn't it? My daughter had a few night terrors when she was 14 months old (after we moved her to a new room).
Despite the scary name, night terrors are not dangerous. Do not wake her. Just wait it out with her, making sure she doesn't hurt herself (walk down the stairs, etc.) The research I read indicated that the child is NOT dreaming -- she is in a state of "deep sleep" (which is the non-REM sleep phase) and she will have no memory of the event.
Hopefully, this won't last long. If you begin to have serious concerns, you can contact your Pediatrician. Or there is a wonderful group of Sleep Disorder Physicians at Central DuPage Hospital, affiliated with Childrens Memorial.