Time passes when you're sailing. It won't pass when you've approached certain islands, and until you leave that square it won't start running again. Not all the islands go through this however, only ones with events (Forsaken Fortress, Dragonroost, Outset, Windfall, etc.). Time will keep running on other islands or out-crops.
... I found this out the other day trying to catch Windfall at daybreak. Missed it faffing around.
EDT: Correcting myself