While sleeping the brain goes through previously experienced things, consolidates new memory contents and summarizes similar experiences into more general knowledge. This also applies to babies. However, they can more than just generalize what they have learned. A recent study shows: during sleep a baby's brain also consolidates the details of its individual experience and protects them from generalization and is therefore also important for what is known as episodic memory.

Source: Babies retain even detailed events during a nap