It all depends on your particular motherboard, OS and peripherals. Search for "problems with S3 sleep" or "S3 standby". MCE Standby Tool is a very popular utility for enabling S3 standby.
Basically, S3 is a low power idle state that allows Media Center to wake up the computer, record a scheduled program or update its program guide then go back to sleep. Keyboard/mouse activity should wake the computer. For a long while, it was only available on OEM systems running MCE for WinXP. By now, most motherboards support it.
Many people had headaches with it not going to sleep or not waking properly. I never got it to work in WinXP MCE. But it now works like a charm in Windows 7. I'm running it with the Nmedia RF keyboard and remote and the system in my signature. Power consumption went from 125W (24/7) to about 3W in standby.