**Core Concept**
Ponto Geniculo Occipital (PGO) spikes are a type of electrical activity observed in the brain during specific stages of sleep. They are characterized by high-amplitude spikes that originate in the pons, travel through the thalamus, and finally reach the occipital cortex. PGO spikes are associated with the activation of the visual cortex during REM sleep, where vivid dreams and visual imagery occur.

**Why the Correct Answer is Right**
During REM sleep, the brain's visual cortex is highly active, and PGO spikes play a crucial role in this process. The spikes are thought to be involved in the visual processing and integration of sensory information during REM sleep. This is in contrast to NREM sleep, where PGO spikes are not observed. The PGO spikes are believed to be generated by the activation of the locus coeruleus and the subsequent release of norepinephrine, which stimulates the visual cortex.

**Why Each Wrong Option is Incorrect**
**Option A:** This option is incorrect because PGO spikes are not characteristic of slow-wave sleep, which is a stage of NREM sleep. Slow-wave sleep is characterized by high-amplitude delta waves, not PGO spikes.
**Option B:** This option is incorrect because PGO spikes are not associated with the activation of the auditory cortex, but rather the visual cortex. While auditory processing does occur during REM sleep, it is not directly related to PGO spikes.
**Option C:** This option is incorrect because PGO spikes are not characteristic of wakefulness. While the brain is active during wakefulness, PGO spikes are not observed in this state.

**Clinical Pearl / High-Yield Fact**
It's essential to remember that PGO spikes are a hallmark of REM sleep and are associated with the activation of the visual cortex. This is a key differentiator between REM and NREM sleep, and understanding this concept is crucial for diagnosing sleep disorders and other neurological conditions.

**Correct Answer:** B. REM sleep