There are three basic power modes (in fact there are seven power states as defined by ACPI, but we can group some based on how they behave):

Power Modes

1. Fully active (S0): Processor, primary memory (RAM), secondary memory (hard-drive, optical drives, etc.), motherboard, I/O (PCI, USB) are fully active. This is the normal power mode when the computer is in use.
2. Suspend (S1 to S3): In this mode the computer saves energy by powering off some devices and keeping others with parts disabled just saving the context. CPU runs at lower speed keeping parts disabled, primary memory is kept active, secondary memory is powered off, some I/O is powered off (USB), video is powered off. This power mode has very low latency (needs little time to go from suspend to active), but requires a substantial fraction of the power. For suspend to work, your computer must have ACPI enabled in the BIOS (usually this is the default setting). This power mode is only useful if you plan to resume using the computer soon after it suspends. There are in fact different levels: S1, S2, S3. In S1 the CPU only reduces clock speed to save energy (if supported), in S3 the CPU is powered off and context is kept in RAM.
   • Standby (s3) mode has the following properties:
     • Memory contents are kept active on chip.
     • The system is powered down except for minimal power to keep the ram active.
     • System does not perform a Power On Self Test on resume.
     • A Power Failure will destroy the standby state of the machine.
     • Resumes very quickly as no POST is performed and no data must be read from disk to re-populate memory.
     • Is prone to be more problematic to get working properly.
     • Uses minimal power to keep the system memory active.
3. Hibernation[ (S4)|S4 Standby] has the following properties:
   • stores the contents of ram to the Hard Disk Drive prior to powering off.
   • The entire system is powered down in this state.
   • System performs a full Power On Self Test on resume from Hibernation.
   • Has advantages in that a power failure will not destroy the Hibernated state of the machine (data stored on disk).
   • Can take some time to resume dependent on the size of ram and the speed of the disk that the memory image is read from. 
   • Typically works better on some systems due to the complete Power On initialization on startup. 
   • Uses no power in it's sleep state.

Standby and Hibernation Functions

• Standby (S3) and Hibernation (S4) modes provide the following functionality:
  • +5vsb settings. This setting is usually achieved by jumpers on the motherboard. When active +5 volts of power is supplied to USB devices. This allows the PC to detect power on events from USB remote controls and/or keyboards/mice. Consult your motherboard manual for advice on how to set these jumpers for specific USB ports.
  • PC can be woken from either state (s3) or (s4).
  • PC will wake automatically from either state to perform scheduled activity.

How does the PC know when to wake up?

Any task on the PC that is required to perform an action at a given time will report that action to windows at the time the system goes into hibernation or standby. The system then programs the standby timer on the motherboard to countdown until such time as the first scheduled task is due to take place. When the timer reaches 0 the machine will automatically wake. Waiting tasks will then check the current time and perform any actions as normal.\

The standby timer is a bios level function powered by the bios battery and is therefore protected from power failures. 

For all those power modes to work it is necessary that all the hardware, Power Supply Unit (PSU), BIOS, drivers and OS are compatible with them. If any element in this chain fails, your computer will not be able to enter in the desired power mode (freezes or crashes). Modern hardware is fully compatible, but sometimes you will find that an older PCI card (TV card, modem, network adapter, etc.) isn't and that can prevent the computer to hibernate or suspend. Troubleshooting a computer that fails to go into lower power modes is difficult and out of the scope of this introduction.

If a requested power mode is not available, the system will try the next lowest power mode. For instance if S3 is not possible the computer will try S1; or if Hibernate is not possible, it will suspend to S3. So if you find that your computer is still drawing too much current, that may indicate that the desired power level could not be enabled.

Further Information

• Advanced Control Power Interface
• Advanced Configuration and Power Interface (Wikipedia)