Hibernation vs Standby Mode are very similar and people tend to confuse the differences. Standby basically turns off power consuming components like the hard disks and monitor. It switches the computer to a low power state. Its much like a warm boot. Any contents of memory and unsaved desktop settings are lost. Hibernation saves state information by writing a hibernation file which contains the contents of memory and is thus the same size as total RAM. This is a snapshot of active memory. When you turn your PC back on, the state, including which applications are running (desktop) and the memory contents are restored to RAM and voila! - you are back to where you were when Hibernation mode started. The restoration of state can take place in 5 minutes, 5 hours, 5 days, 5 weeks, ....

Hibernation is only available if your system is ACPI-compatible. If it is not, the Hibernation tab will be missing and you will have an APM tab instead. To enable Hibernation mode as one of your Shutdown options:

• click Start / Settings / Control Panel
• double-click Power Options icon
• click Hibernate tab and select the Enable hibernate support check box
  if the tab is not there, W2K does not support the feature on your hardware, bios, or whatever. The same dialog box show free disk space and required space to store memory. If it is missing, check for a newer bios for the motherboard.
• click Apply

Important Note: Actually, volatile memory is preserved in Standby Mode, as the system remains in a minimally powered up state. All state information is preserved as long as system power is available. (submitted by Steve Forster)