The Sleep power management option saves the computer state in RAM and powering off uneeded components until the computer awakes. Hibernate is similar but saves system state to the hard disk, which saves more power but is slower to resume when waking.
Sleep mode (or suspend to RAM) is a low power mode for electronic devices such as computers, televisions, and remote controlled devices. These modes save significantly on electrical consumption compared to leaving a device fully on and, upon resume, allow the user to avoid having to reissue instructions or to wait for a machine to boot. Many devices signify this power mode with a pulsed or red colored LED power light.