I pretty much always sleep with my hair loose (it's above my shoulders now, but it used to be near my waist in length). I have braided it in the past, but mostly as a way of keeping my neck and back a little cooler when I'm too warm than as a way of controlling the tangles.
Now that my hair is shorter and I also changed how I style it (I almost never brush it, only finger comb or comb in the shower with conditioner), I don't worry about tangles in my hair when I wake up. I have such awful bed-head that, even if my hair isn't actually tangled, it looks ridiculous. So even if I'm not actually showering, I stick my head under the shower spray, add a bit of conditioner, and at least finger comb it to get it to look normal.
My hair really doesn't tangle that easily, though. Even sleeping on a flannel pillowcase (about the most friction you can have, but oh so warm and cozy), I don't wake up with especially tangled hair. Conditioner and water always seem to be enough to get most of the tangles out, and the few that remain are easy enough to work out with my fingers or a comb.