I just started reading 'Founders at Work' and find it kind of funny that they cite Steve Jobs in this article, when during his interview, Woz said that some of their best ideas (when building Apple) came after several days of not sleeping.
My own anecdata are somewhat conflicted on this issue. I always did well in school, understanding the key issues in a design problem (aerospace engineering) long before my classmates, and I always attributed it to my sleep habits (8-10 hrs daily).
On the other hand, some of my finest moments of clarity have come after all-night cramming sessions. It's as if you fatigue all the usual pathways and are open up to entirely new ways of seeing things.
"... Woz said that some of their best ideas (when building Apple) came after several days of not sleeping ..."
Don't confuse working on a problem for a long time, understanding it very clearly with having the idea in your head and regurgitating a solution in one long stint. Woz emphasized this in his 2005 Startup School talk. Understanding an idea so completely in your head you can simplify it no more.
I'm not confusing anything, just restating what he said in his interview with Jessica. The actual quote is "When you get very, very tired -- and I had been up for four nights all night long; Steve and I got mononucleosis -- your head gets in this real creative state and it thinks of ideas that you'd normally just throw out."
There was a study a few years ago (unfortunately I don't have the link handy) that showed that the lack of sleep is directly correlated to a spike in creativity.
