The basal forebrain is a collection of structures located ventrally to the striatum. Cholinergic neurons in the basal forebrain participate in behavioral processes such as attention and memory.
The basal forebrain is the location where adenosine acts on A1 receptors on cholinergic neurons resulting in hyperpolarization of these neurons. Thus they inhibit the release of Acetylcholine from these neurons. Acetylcholine is known to promote wakefulness in the basal forebrain. Inhibition of actylcholine release in the basal forebrain by adenosine causes slow wave sleep. The basal forebrain and apposing areas are a focus for sleep research. Stimulating the basal forebrain gives rise to EEG sychrony and sleep. It is located near the sub-arachnoidal space.
Research, conducted by investigators from Children's Hospital Boston and the University of Helsinki, ties together previous observations about sleep and finds that nitric oxide production in the basal forebrain is both necessary and sufficient to produce sleep. 
http://www.memorylossonline.com/glossary/basalforebrain.html The basal forebrain is a term for a group of structures that lie near the bottom of the front of the brain, including the nucleus basalis, diagonal band, medial septum and substantia innominata. These structures are important in the production of a brain chemical called acetylcholine, which is then distributed widely throughout the brain. Acetylcholine affects the ability of brain cells to transmit information to one another, and also encourages plasticity, or learning. Thus, damage to the basal forebrain can reduce the amount of acetylcholine in the brain and impair learning. This may be one reason why basal forebrain damage can result in memory impairments such as amnesia and confabulation. One common cause of basal forebrain damage is aneurysm of the anterior communicating artery.