Daylight cycle

The day/night cycle is a 20 minute long lapse between two main light settings.

Daytime
Daytime is the longest section of the cycle, lasting 10 minutes.
 * When a player first spawns in Infdev and Alpha, the cycle will always start right at the beginning of daytime.
 * Daytime features the Sun, and a light blue sky.
 * During daytime, all blocks that are in direct vertical view of the skybox receive daylight, the strongest light possible.
 * Daylight provides ample light for the growth of all trees and crops.
 * Zombies and Skeletons in direct view of the skybox (and not in water) during daytime will be set on fire.

Sunset
Lasts 1:30 minutes.
 * A period between daytime and nighttime, when the Sun sets on the West horizon, and the Moon rises on the East horizon.
 * All blocks that are in direct vertical view of the skybox get 1 shade of lighting darker every 10 seconds.

Nighttime
Lasts 7:00 minutes.
 * During nighttime the world is covered in darkness, and hostile mobs may spawn on the surface.
 * Nighttime features the Moon, and a dark black sky, with white stars.

Sunrise
Lasts 1:30 minutes.
 * A period between nighttime and daytime, when Moon sets on the West horizon, and the Sun rises on the East horizon.
 * All blocks that are in direct vertical view of the skybox get 1 shade of lighting brighter every 10 seconds.

Watch
In the Halloween Update, Notch added a watch that tells the time. It's crafted like this: