Reverie was the elven state of meditation, which had certain sleep-like effects. During the meditation, sometimes referred to as a "trance," the elf conducted a series of mental exercises that refreshed the elf's body and mind. During this meditation an elf was fully aware of the outside world, though breaking meditation in response to external events had an effect on the elf similar to disturbing the sleep of any other humanoid.
Elves did not actually require sleep as such, but rested in reverie for generally half as much time as the other humanoids slept.
Elves were capable of sleep, but only when they were severely ill or wounded.