The computer is still running when you put it to sleep, just in a low power state. When you hit the power button it will wake up in just a few seconds right where you left off.
Pro: Quicker to get back into Windows
Cons: Waste of energy if left sleeping for more than a short amount of time. If power goes off you lose any unsaved data.
The alternative to Sleep is Hibernate. Stores the contents of memory to the HDD and switches off completely. You still have to wait for Windows to boot, but all your programs etc will be the way you left them.