Saplings are an important resource that allows trees to be grown to replace those cut down by miners in search of logs, planks or sticks.
In Survival mode, saplings are dropped randomly when leaves wither or are destroyed by the player. The withering behaviour of leaves is explained in detail in the leaves article. Most tree canopies will drop at least one sapling block, though they may drop more, and large tree canopies should drop several if completely denuded. When trees grow, it's possible for some leaves to be generated in an unsupported position, and as they wither they may drop saplings, allowing saplings to be found quite often below newly grown trees. It should be noted that saplings will generally not drop from a tree canopy that is consumed by fire, as the saplings are prone to landing on flaming blocks unless the canopy is lit from above.
Saplings can be planted on any dirt or grass block, and will grow into a new tree if they are exposed to a light level of at least 13, and have at least 4 empty blocks above the sapling "block" itself. They will pop out of the ground if they are not exposed to a light level of at least 8, but will not pop out of the ground if they do not have enough headroom, provided they still have sufficient light. In this way they can be used as decoration in structures provided they don't have room to grow into full trees, or are never exposed to a light level of 13 or more.
A light level of 13 is provided by an adjacent torch, so saplings can grow into trees underground with just one adjacent torch. It should be noted that while moonlight has a brightness of 4, saplings will not pop out of the ground when exposed to moonlight - they will survive low light provided they have a "clear view" of the sky.
In Creative mode, saplings function as a decoration block, and can be placed freely. Saplings will grow into a full tree after a few seconds if the server has "grow-trees" set to "true" in the "server.properties" file and if they are on a grass block. They will not grow on a dirt block.