In psychology, scientists refer to a three-stage model of how memories are formed in the brain. These are:
Among the three, only the consolidation stage occurs during sleep, while the acquisition and retrieval processes obviously happen during wakefulness. Note also that there are two types of memory involved in these stages: the short-term and the long-term memory.
A piece of information, for instance a phone number, is easily recalled if only a short period transpired between the acquisition and the retrieval stages. But it is also vulnerable to being completely forgotten because it has not been stored for the long-term, unless it is your own phone number, which you always have to recall every time someone asks you for it.
As you sleep, the pieces of information that have been acquired during the day are processed and transferred to long-term storage in the deeper part of the brain. When you retrieve a piece of information, that memory is revived and is established more firmly with each recall.
The drawback in the long-term storage of information is that without the retrieval stage, these memories are more likely to become remote and inaccessible. Thus, the proposition is true that with repetitive retrieval, by habit or otherwise, memories are strengthened and become almost automatic over time.
The processes that occur during these stages explain why sleep is irreplaceable in memory formation. Sleep affects one’s performance in learning in a way that poor sleep or lack of it may negatively affect one’s ability to pay attention during the acquisition stage. On the other hand, lack of sleep may also deprive the brain of the processes that are essential for the filing of information during the consolidation of memory.
It may happen that short-term memories fade away before they are even processed during sleep. This is why the practice of cramming among students and lack of sleep can be a bad combination.