I drive a manual transmission '08 Honda Fit.

On my daily 17 mile commute to work, there are three long hills that I can coast down, each about a half mile long. Going down these hills, I've done two different things:

• I take it out of gear and let the engine idle around 1000 RPM while I coast down
• I take my foot off the gas and just let gravity do the work, leaving it in gear at 2500 RPM

What is going on in the transmission and the engine under these two scenarios? Do either cause undue wear? Does one save more fuel than another? I am interested in fuel efficiency but I also want my car to last a long time.