
While we are sleeping, short term memories which we have created in the outer part of our brain (the cortex ) are linked to our long term memory which is associated with a region in our limbic system called the hippocampus. If we don't get enough rest this process cannot occur and our learning is impaired.
Lack of sleep can also make us more irritable, and increase mood swings. It can endanger the immune system which can make us more susceptible to illness. A chronic lack of sleep can result in depression

Our Brain - promoting brain-friendly learning
Bryn Evans 2003