All the fucking time. And I pace while doing it too, especially as a kid when I would walk around outside imagining random stories. I don't usually imagine stories now though, it's mostly music. I always have random tunes, melodies, textures, styles, beats and lyrics, buzzing around in my head and they often form into original song ideas that I sometimes try to create. When I play drums or guitar I often imagine I'm playing along to a song, I fill the place of the other instruments with my imagination.
I often spend long periods of time imagining long political and philosophical conversations with people, most of the time people I have talked to before but I couldn't quite say what's on my mind at the time. I'm not really good at expressing my thoughts on the fly, especially with people I'm not really comfortable with or don't know well. The absolutely perfect thing to say always comes after the moment presented itself for me, and so I replay those conversations in my head but with what I truly wanted to say in place. But occasionally it's with people I haven't met before too.
Video game ideas occupy my imagination a lot as well, some of them I get really detailed and intricate with.