The Day/night cycle was a phenomena seen in Blood Omen: Legacy of Kain whereby the passing of time in the real world would translate to time passing in the game - at a scale of roughly 15 minutes in the real world equating to a full 24 hours in game.
Time passing was indicated by a sundial clock in the Status box showing the current time. As the evening approached it would become darker overnight before day broke and it became light again the next morning (roughly 7.5 minutes later).
Kain's condition could be affected by the cycle as he would be more powerful at night.
Despite the Day/night cycle only being present in Blood Omen: Legacy of Kain, alpha versions of Legacy of Kain: Soul Reaver also include a similar cycle with area becoming darker between 18:00-19:00 and getting lighter once again between 06:00-07:00 (as revealed in the debug menus) - this time the scale equated to roughly a minute for every hour. Notably sunlight beams are absent during nighttime. The Cycle does actually exist in the later May betas but must be activated manually.