Final answer:
During sleep, memories stored in the hippocampus are transferred to long-term storage in the cortex. The hippocampus encodes new memories while the amygdala influences where memories are stored based on emotions.
Step-by-step explanation:
During sleep, memories stored in the hippocampus are moved to permanent storage in areas of the cortex. The hippocampus is associated with declarative and episodic memory as well as recognition memory. It is where new memories are encoded before they are transferred for long-term storage. The amygdala plays a part in determining where memories are stored based on the emotional response to the event. Meanwhile, the thalamus acts as a sensory relay station and helps regulate consciousness, arousal, and sleep states, but it is not directly responsible for the memory storage process.