Sun

The Sun is a sprite appearing only in Indev, Infdev, Alpha and Beta that lights up all top-most blocks while it is in the sky. When the player creates a new map the sun starts on the horizon at dawn. As time passes, it will slowly move across the sky and over the horizon while the moon rises on the opposing horizon. Daytime lasts 10 minutes and grass blocks will only spread when exposed to sunlight. Obviously even if the sun is shining the deeper you go underground the less sunlight comes in until there is no  sunlight coming in at all, except for blocks that do not have anything  on top of them (sunlight directly hitting them at a vertical angle).

Sunlight
Sunlight, in game, is the name given to the light which illuminates all blocks which do not have a shadow cast over them by a non-transparent block positioned vertically above them in the sky. Clouds do not cast shadows, and shadows are not affected by the position of the sun in the sky.

Sunlight (and torchlight) is one of the two prerequisites to turn dirt blocks into grass blocks (the other being that there must be another sun-affected grass block adjacent to it). Sunlight alters the brightness of the blocks it falls upon.

Mobs
Sunlight is harmful to skeletons and zombies, and they will be set on fire upon entering an area illuminated by sunlight (It is possible for skeletons and zombies to survive in direct sunlight if they are in a body of water). Spiders, slimes and creepers are not harmed by sunlight, but no enemy mobs can spawn in it and Spiders turn neutral during the day and slimes are highly unlikely to ever see sunlight due to the fact that they can only spawn deep underground.

Trivia

 * The sun is 8 x 8 pixels, which is enough resolution for Notch to have given the Sun a circular shape if he had wished.
 * When the sun rises and sets the blocks change their light level depending on what angle the sun is at (giving the effect of gradually getting lighter at dawn and gradually getting darker at dusk).
 * The sun is larger when seen from underwater than when seen on land.
 * The sun is also larger during sunrise and sunset.