Sleep puts the Mac in a low-power state: memory stays active so everything reopens instantly. Shutdown powers everything off; a fresh boot is needed to resume.
What sleep still does: background housekeeping — some downloads, certain update preparation when plugged in — plus iCloud sync activity. Apple-silicon Macs are extremely efficient in sleep, so battery drain overnight is typically a few percent or less; significant drain points to a misbehaving app or a Bluetooth accessory waking the machine.
When to shut down: long periods without use (a week or more), travel where the battery will sit unused, or when troubleshooting a stuck process. When to just close the lid: normal day-to-day use — that's what the design is optimized for, and frequent full shutdown/reboot cycles gain you nothing for system health.
One practical difference: after a shutdown the next boot is slower and apps reopen from scratch; after sleep everything is exactly where you left it. For most people, shutdowns are a travel habit, not a nightly ritual.
— Osnivo Editorial