Hello,
For a project of mine I am trying to make an arduino sleep so that it can take up the least amount of power as possible. But I would like to be able to wake it up with a character sent over an xbee wireless connection. is this kind of thing possible?
A quick search brought up this page. It talks about the sleep modes of the arduino and mentions that the arduino will wake on serial input.
http://playground.arduino.cc/Learning/arduinoSleepCode
I don't have too much knowledge in this area but it sounds like you are looking for something called an interrupt which will basically run a chunk of code when some external event happens, such as serial data coming in.