According to Dr. Matt Walker, author of Why We Sleep, sleep performs four critical memory/learning functions:

1. Sleep gets your brain ready for new memories. If you haven’t slept well it’s harder to create new memories.
2. Sleep cements short term memories in the brain. Sleep after learning helps you retain memories. One mechanism for this is called memory replay. Studies in rats showed that memories from the day are replayed over and over. Then are replayed faster (5-20 percent or times?) at night in deep non-rem sleep. They are also replayed in real time or at half speed during rem sleep.
3. Sleep intelligently interconnects information learned with all prior memories. “Almost a form of informational alchemy at night”. Perhaps this is why you can divine solutions at night. Discovering a hidden pattern in a set is 3x more likely during sleep.
4. Sleep helps with forgetting. Some memories are tagged as important. Others as not (eg. Where I parked the car yesterday morning). Sleep generally does the right thing, freeing up useless memories and cementing the useful ones. In “The Mind of the Mnemonicist” by Luria (Маленькая книжка о большой памяти), the subject of the book, Solomon Veniaminovich Shereshevsky, found himself wanting to forget, and unable to do so. Think not of the benefits of forgetting nothing, think of the downside of remembering everything.

That said, I take these assertions with a grain of salt given the generally nascent state of brain understanding, as well as specific critiques leveled against the book.

Source: https://www.samharris.org/podcasts/making-sense-episodes/267-kingdom-sleep