Sheep

Sheep are passive mobs that supply wool when sheared or killed and can be dyed with any of the 16 colors before shearing to produce colored wool. Sheep are 1.25 blocks tall, 0.625 blocks wide and 1.4375 blocks long, and they naturally spawn in the following colors: white, black, gray, light gray, brown, and pink. Killing an adult sheep will drop a single block of wool, whereas shearing them yields 1-3 blocks each time. Killing a lamb gives nothing.

Appearance
Most sheep upon natural generation have white wool. Others can naturally spawn in black, gray, light gray, brown or pink wool. They have light tan skin with their eyes going in opposite direction and pink lips.

Usage
Wool is easiest to obtain from sheep, as it can be tedious to craft wool using string. Wool can be obtained from sheep by using Shears on the sheep or killing the sheep. Shearing a sheep will produce 1-3 wool. If you have an enchanted sword with fire aspect it is possible to shear a sheep as it dies from fire damage and produce more wool than usual. As of version 1.1.0 sheep regrow wool by eating grass and turning the grass block into a dirt block; they can also eat tall grass. Lambs eat grass much faster than adults. The sheep's head also moves down and wiggles to imitate eating, but a lamb's head goes inside the dirt itself.

Sheep will drop one wool when killed even if they are killed by Fire, Cacti or Wolves. Wool can also be crafted using 4 pieces of String, but it is less hazardous for the player to shear sheep rather than hunt down Spiders constantly.

A block of white wool can be crafted with a unit of dye to produce colored wool. However, a much more efficient method is to apply the unit of dye directly to an un-sheared sheep by right-clicking on a sheep (any color) while holding it. The dyed sheep can drop 1-3 blocks of colored wool when sheared. When the dyed sheep regrows its wool it will retain the dyed color, supplying an endless supply of colored wool. For this reason, sheep farms can produce infinite amounts of wool and sheep when bred. So if you like to decorate, sheep farms are recommended.

Behavior
Like other passive land mobs, sheep wander around aimlessly, often spawning in flocks of 2—8. They can be heard bleating occasionally, even from some distance away. When they encounter an obstacle, they will often try to jump over it, even if the object is too tall to jump over. Sheep can swim and make no attempt to stay out of water, therefore a common sight might be several sheep bouncing up and down in the water. A sheep's color has no effect on its behavior. Sheep will eat grass, turning it into dirt. This will make their wool grow back if they are sheared. The regrown wool will be of the same color as before the sheep was sheared, regardless of the original color. Packs of wolves may attack the occasional individual loner. If you are trying to capture a sheep for breeding or sheering, it will follow you as long as you are holding wheat. Keep in mind this can get very overwhelming if you are near a large flock of sheep as they will all try to follow you.

Breeding
Breeding two sheep will produce a lamb of the same color as one of the parents. The color is more likely to be that of the parent fed wheat first. (i.e., feeding a red sheep wheat first, then feeding a yellow sheep, will result in the lamb being more likely to be born red.) No mixes of colors (like "red+yellow=orange") will occur. It doesn't matter if either parent has been sheared. This can be used to obtain large quantities of colored wool, rather than relying heavily on potentially rare dyes. (Lapis Lazuli requires fairly deep mining, and most of the others may be absent from your local biomes.)

Xbox 360 Edition
When killed sheep will drop exactly 1 wool - but when they are sheared they can drop from 2-4 wool. The most common sheep is white; then brown, then light gray, then dark gray,then black and, with a 0.5% chance of spawn, pink sheep.

Currently we do not know if sheep can re-grow their wool.

Natural (in order of rarity)
* White was the original color before Beta 1.2.

Bugs

 * A very rare glitch where a sheep can get stuck in the ground can happen. This seems to happen because the sheep is a little bit taller than 1 block.
 * A bug where sheep jump up to about 6 or 7 blocks high and/or they can glitch through fences (confirmation acquired).
 * There is an unofficial bug (confirmed on SMP) that if a closed off area has too many sheep, then some of them may "squeeze" through the walls. This only works if the walls are 1 block depth.
 * In Pocket Edition, all sheep appear white, although when sheared can produce black, light gray, gray, dark gray, brown, or white wool.

Future
Jeb may add mutton to Minecraft.

Trivia

 * Sheep were the second mob to spawn with both a separate body and armor file, the first being the pig; the sheep's "armored" state is wooly, while the pig's "armored" state is when they are wearing a saddle.
 * Sheep were the last mob added in Survival Test.
 * After being sheared, all sheep (regardless of their original color), will have remnants of white wool color on their head and legs.
 * Sheared sheep have a more slender head and exposed ears.
 * If you damage the sheep 7 hits (3 1/2 hearts) you can get 5 wool blocks by clicking both mouse buttons at the same time while holding shears, though it requires practice as you have 1/20 of a second between each mouse click.
 * Sheep are the only mob that give a block as a drop; all other mobs give items.
 * If a sheep spawner is placed via hacking, there will be a black sheep model spinning inside, but it will spawn only white sheep.
 * Lambs cannot be sheared.
 * Currently, if one were to sprint and knock back a sheep while the sheep is in its grass eating stance, it will eat the grass it gets knocked into, and it will take no attempt to run away after/while eating.
 * Sheep will eat grass through half slabs.
 * The bottom of the feet to sheep aren't rotated 180 degrees. A sheep hoof is split in the front.
 * Sheep can be "herded". If you have wheat in your hand, sheep will follow you around, making it easy to herd them into a pen (also works with cows).
 * Sheep can still eat grass even while moving in minecarts.
 * Sheep cannot fit through the gap if the 90 degree intersection of two fences is removed whereas the player can get through easily. This means you can have a sheep pen without needing a fence gate, although since this would allow creepers, skeletons & zombies to enter, it is not advisable.
 * Before shears were added, you could obtain wool by punching the sheep, causing its wool to drop. This was later changed as Shears were added but you can obtain them by killing the sheep.
 * Sheep are able to climb ladders.
 * Lambs grow seemingly faster than piglets.
 * Sheep can eat grass through fallen snow.
 * In Pocket Edition, a sheep's head is always a rectangular prism shape, similar to when sheared in other games.
 * Due to Potions of Invisibility only effecting the main texture of mobs, the wool of a sheep will still be visible while under its effect. Removing the wool by shearing will allow it to be completely invisible.
 * In Survival Test sheep used to graze and eat grass, turning it into a dirt block, and after eating three grass blocks, sheep would regrow their wool.
 * Sheep were originally planned to drop meat when killed.
 * A sheep will suffocate if spawned in an 1x1 space. This is because sheeps are a little bit more taller than 1 block.