1) "software built into the CPU?" That doesn't even make sense.
It's hardware and software. Every modern CPU has microcode onboard, but these chips go beyond that. They have a whole little computer in the processor.
And that whole little computer's software is NOT built into the CPU. It's SOFTWARE, pure and simple. The code it runs is loaded in via the firmware/drivers.
2) More efficient standby and better battery life? That sounds good to me...
No, it's just so that it can wake it up with a voice command. It's not more efficient or better battery life.
Yes, it is. Using a separate hardware component to do this means you don't need to run the power-hungry main CPU all of the time.