Hibernation is just fine. Just make sure to save your work before you hibernate in case you get that rare error where you cant come out of hibernation. Saves you the hassle of trying to recover something that was stored in RAM at the time it went into hibernation.
That is fine as well. As long as you are not downloading anything, moving files, or have a scan set to go off while the system is hibernated.
Sleep keeps the computer on, in a low-power state - it lets you get back to what you were doing than Hibernate.
Hibernate saves everything in the RAM to the OS drive (I think), and then turns off. Then loads it back when you turn it on again. I usually just turn my netbook off since it's usually faster than leaving it on hibernate.