It all depends on personal preference as to what is "best".
In sleep mode all actions on the computer are stopped and any open documents and applications are put in memory. You can quickly resume normal, full-power operation within a few seconds. Sleep mode is basically the same thing as “Standby” mode. Sleep mode is useful if you want to stop working for a short period of time. The computer doesn’t use much power in Sleep mode.
The Hibernate mode saves your open documents and running applications to your hard disk and shuts down the computer, which means once your computer is in Hibernate mode, it uses zero power. Once the computer is powered back on, it will resume everything where you left off. It's usually recommended to use this mode if you won’t be using the laptop for an extended period of time, and you don’t want to close your documents.
There's also a third option called Hybrid Sleep. This is a combination of the Sleep and Hibernate modes meant for desktop computers. It puts any open documents and applications both in memory and on your hard disk, and then puts your computer into a low-power state, allowing you to quickly wake the computer and resume your work. The Hybrid Sleep mode is enabled by default in Windows on desktop computers and disabled on laptops. When enabled, it automatically puts your computer into Hybrid Sleep mode. Hybrid Sleep mode is useful for desktop computers in case of a power outage. When power resumes, Windows can restore your work from the hard disk, if the memory is not accessible.
The Sleep and Hibernate options are accessed using the arrow button next to the Shut down button on the Start menu. If you don’t see the Sleep option or the Hibernate option, it may be for one of the following reasons:
- Your video card may not support the Sleep mode. Refer to the documentation for your video card.
- If you don’t have administrative rights.
- The power-saving modes in Windows may be turned on and off in your computer’s BIOS (basic input/output system). The key for accessing the BIOS differs for each computer manufacturer. Instructions for accessing BIOS generally displays on the screen as the computer boots. For more information, see your computer’s documentation or check the website for your computer’s manufacturer.
- If you don’t see the Hibernate option, the Hybrid Sleep option is mostly likely enabled.
To access and change the various power plan settings, see this tutorial.
http://www.sevenforums.com/tutorials/778-power-plan-settings-change.html
EDIT: Deacon beat me to it. He always was a better typist than me.