When the SM2:0 bits are written to 010, the SLEEP instruction makes the MCU enter Power-down mode. In this mode, the External Oscillator is stopped, while the external interrupts, the Two-wire Serial Interface address watch, and the Watchdog continue operating (if enabled). Only an External Reset, a Watchdog Reset, a Brown-out Reset, a Two-wire Serial Interface address match interrupt, or an external level interrupt on INT0 or INT1, can wake up the MCU. This sleep mode basically halts all generated clocks, allowing operation of asynchronous modules only.
Note that if a level triggered interrupt is used for wake-up from Power-down mode, the changed level must be held for some time to wake up the MCU. Refer to External Interrupts for details.
When waking up from Power-down mode, there is a delay from the wake-up condition occurs until the wake-up becomes effective. This allows the clock to restart and become stable after having been stopped. The wake-up period is defined by the same CKSEL Fuses that define the Reset Time-out period, as described in Clock Sources.