It turns out there are two critical periods to your sleep cycle. The Stage 3 NREM phase is crucial for physical health. Your immune system and cells regenerate. It's called recovery sleep. The system in the brain which creates the stress response (the hypothalamic-pituitary-adrenal axis and the sympathetic nervous system) is powered down. We spend the most time in this kind of sleep and it seems to be akin to recharging our batteries.
The Stage 4 REM sleep phase enhances our emotional health, allowing us to keep our feelings in check so that we can function in our day. Emotional memories are encoded during this phase and are separated from the actual emotional response, allowing us to retrieve these memories from a distance and not get so overwhelmed in them again, as if they were happening all over. People with trauma histories have a particularly disrupted Stages 3 NREM and 4 REM cycles, resulting in the inability to process memories and deactivate the stress response.
See the below graphic for more details about all the stages of sleep.
Here's to a restful night's sleep!