Sheep

Sheep are passive mobs that first appeared in Survival Test mode. The main purpose of sheep is to supply wool; a building material. Sheep are 1.25 blocks tall, 0.625 blocks wide and 1.4375 blocks long.

Behavior
Sheep wander around aimlessly. When they come to an obstacle they will often try to breach it by jumping, which makes for some odd behavior when at obstacles they cannot overcome. They will make no attempt to stay out of water, and a common sight is several sheep bouncing up and down in the water. Sheep often spawn in groups of 2-8. Like all other passive mobs, they move entirely randomly. Differently colored sheep act exactly the same as their white counterparts.

Appearance
Sheep are the second mob to spawn with both a separate body and armor file, the first being the Pig. The sheep's armor is its wool, while pigs can wear a saddle on their back.

In the Beta 1.2 update, it was made possible for sheep to naturally spawn with black, gray, and light gray wool along with the traditional white. However, the majority of sheep still spawn with white wool, and darker colors tend to be rarer. Dyes can also be applied directly to sheep and shearing colored sheep produces dyed wool blocks of the corresponding color. This can be a more efficient method dyeing wool for building projects, since sheep drop up to three wool blocks when sheared.

As of Beta 1.4, they may now also spawn with brown and pink wool. Before, brown wool was impossible to acquire due to the lack of Cocoa Beans necessary for dyeing. You can now find the beans in Dungeons and brown sheep can be found naturally.

The current colors of naturally occurring sheep are now White, Light Gray, Gray, Black, Brown, and Pink.

Drops
Survival Test Indev and Infdev Alpha Beta
 * 1-3 White Wool (on hit)
 * 0-2 Brown Mushrooms (on death)
 * 2 White Wool (on hit)
 * 1-3 White Wool (on hit)
 * 1-3 Wool the same color as the sheep (on hit)

Sheep do not drop wool if they are damaged by cacti, lava, fire, an arrow shot from a dispenser, drowning or falling; only by being hit, with the exception of the being hit with a non-damaging snowball, egg or a fishing rod's hook. This means that it is not possible to collect wool blocks using a mob grinder trap using these methods. (However, wool can be crafted from string dropped by spiders). Sheep will also drop their wool when attacked by wild or tame wolves. Jeb mentioned on Twitter that he is working on shears.

Trivia

 * The only naturally spawning sheep, in order of rarity, are white (81.836% chance), black (5%), gray (5%), light gray (5%), brown (3%), and pink (0.164%).
 * No matter what color sheep it is, it has the same white wool color on its head and shaved body.
 * Applying dye to sheep and then hitting them gives a high chance of yielding more dyed wool than just manufacturing the blocks, making a more resourceful but harder way to make color blocks.
 * If you want to save dropped wool for further dyeing, you must paint non-white sheep with white dye/bonemeal before shearing it, because you can't dye non-white wool.
 * Sheep with their wool sheared off have a slenderer head and their ears show.
 * In Survival Test sheep would "eat" grass, or rather, turn it into a dirt block. After "eating" three grass blocks, sheep would regrow their wool.
 * Sheep can climb ladders.
 * A creeper explosion can shear off a sheep's fur without killing it.
 * As of Beta 1.4, brown and pink sheep can now occur naturally.
 * In an old Indev version, sheep would drop a mix of White, Gray or Black cloth blocks.
 * In Survival Test you could shear the wool off of sheep without injuring it.
 * Lightning does not shear sheep, however it does damage them.
 * As of Beta 1.6.6 a glitch when leaving the nether while switching tools will cause sheep to rapidly spawn at one time seen here http://www.youtube.com/watch?v=mmTjQ8SK3vE.