1.
The short answer is: it depends.
In fact, it can be configured in PHP and in web server you use. It depends on the mode you use PHP in (module or CGI or whatever).
You can configure it sometimes, though. There is an option in php.ini:
/* If enabled, the request will be allowed to complete even if the user aborts
; the request. Consider enabling it if executing long requests, which may end up
; being interrupted by the user or a browser timing out. PHP's default behavior
; is to disable this feature.
; http://php.net/ignore-user-abort
;ignore_user_abort = On*/
2. Almost always sleep does count. There are conditions when it does not, but in that case not the execution time is measured but execution cpu time. IIS does count CPU usage by app pools, not sure how it applies to PHP scripts.
It is true that PHP does not kill a script that is in sleep right now. That mean that the script will be killed once the sleep is over (easy test: add sleep(15);
to your php and set max execution time to 10. You will get an error about time limit but in 15 seconds, not in 10).
In general, you can not rely on freely using sleeps in script.
You should not rely on script that is run without a user (browser) within a web server, either. You are apparently solving a problem with wrong methods: you really should consider using cron jobs/separate tasks.