Original: To allow them to regain their memories, NaminÃ puts Sora, Donald, and Goofy to sleep for a year; in the process, they must lose the memories of their experience in Castle Oblivion.
Simplified: The group built Castle Oblivion to erase Sora's memories and trick him into joining them. In the end, NaminÃ tells Sora she erased his memories, and gives him the choice to keep his new memories or have his old ones restored.