Translation:Could we all sleep here tonight?
Indicative is the standard grammatical mood that expresses things taht are or are not acutally the case. "I left/ have left/ had left/leave /will leave... home." The subjunctive mood expresses unreal things. "I would leave/ would have left... home." http://en.wiktionary.org/wiki/subjunctive_mood
I believe it is simply following the 'Time-Manner-Place' sequence. After taking out what you are familiar with (Könnten wir... schlafen?), we are left with the description/specifics/conditions of how exactly we are asking to sleep, and they follow an order based on what they are specifying. Going along with the T-M-P sequence, heute Abend is the Time at which we are asking to sleep, alle is the Manner in which we wish to sleep, and hier is the Place. Not being a native speaker, I may have left out some key details, so any native is of course welcome to add on to or correct what I wrote.
Please, I understand that there is a difference between konnten and könnten, and that this last one is the so called "subjunktive form"!
I won't a ask for anyone to explain, but can someone put a link where it is deeply explained? I have tried but I don't even know exactly what I am looking for.