Sheep act like most passive mobs, they make no move to attack. When sheep are provoked they will run around and try and get away from you. Sheep will follow a player holding wheat, but will stop following if the player moves more than approximately 5 blocks away from the sheep. Sheep will try and jump over over one block obstacles and occasionally avoid cliffs and water.
It is possible to dye a sheep a different color. You can do this by holding dye in your hand and right-clicking it on the sheep you are looking at. Doing this will change the color of your sheep. To change the color back to the original color it was, you need to find the color dye the sheep was and right click the sheep, once more, with the dye in hand.
Sheep will eat grass blocks (turning them into dirt) and tall grass . If they do this, their wool will grow back. This means that if there is no grass anywhere, a sheep will not grow its wool back after being sheared. They will keep their wool color if it has been dyed before it was sheared, although the wool patches seen on a sheared sheep will be white regardless of their actual color.
Sheep are bred using wheat. If they are bred, they cannot produce another baby sheep for five minutes. If a player wants a baby sheep to grow up faster, they can feed the baby sheep 10 pieces of wheat to fully grow them up. This is because one piece of wheat is equal to %10 of the remaining time to grow up.
Since the 1.8 Minecraft update, when killed, a sheep will drop 1 to 2 raw mutton. They also drop 1 to 3 wool. The amount of drops is increased with the level of the looting enchantment.