Final answer:
The italicized phrase in the sentence is a gerund phrase that functions as the subject complement.
Step-by-step explanation:
The italicized phrase in the sentence 'His favorite pastime is dreaming about sailing around the world' is a gerund phrase.
A gerund is a verb form that functions as a noun and ends in -ing. In this sentence, the gerund phrase is 'dreaming about sailing around the world,' which functions as the subject complement, describing the favorite pastime.
This type of phrase can be identified by looking for the verb form ending in -ing and the words that come after it, which together form a phrase.
Learn more about identifying phrases in a sentence