Averaged event-related potentials (ERPs) represent sensory and cognitive processing of stimuli during wakefulness independent of behavioral responses, and reflect the underlying state of the CNS (central nervous system) during sleep. Components measured during wakefulness which are reflective of arousal state or the automatic switching of attention are sensitive to prior sleep disruption. Components reflecting active attentional influences during the waking state appear to be preserved in a rudimentary form during REM sleep, but in a way that highlights the differences in the neurochemical environment between wakefulness and REM sleep. Certain ERP components only appear within sleep. These begin to emerge at NREM sleep onset and may reflect inhibition of information processing and thus have utility as markers of the functional status of sleep preparatory mechanisms. These large amplitude NREM components represent synchronized burst firing of large number of cortical cells and are a reflection of the nervous system's capacity to generate delta frequency EEG activity. As such they are useful in assessing the overall integrity of the nervous system in populations not showing substantial amounts of SWS as measured using traditional criteria. While requiring care in their interpretation, ERPs nonetheless provide a rich tool to investigators interested in probing the nervous system to evaluate daytime functioning in the face of sleep disruption, the ability of the sleeping nervous system to monitor the external environment, and the ability of the nervous system to respond to stimuli in a manner consistent with the initiation or maintenance of sleep.