A little of both. By default (you don't use the procnto -h switch), the idle loop will invoke a halt() function when it 
runs. On PPC600 family chips (you didn't say which family you're interested in, but most of the Freescale chips are 
600's) the halt() function looks at the PPC_CPU_HW_POW bit in the cpuinfo section of the system page and, if set, will 
turn on the MSR[POW] bit. That typically puts the CPU into a lower power mode.

If you want to get more sophisticated, take a look at the InterruptHookIdle() API, which allows you to override the 
calling of halt() with code of your own choosing.