Lanolin is an extremely efficient emollient, especially in maintaining the hydration(moisture balance) of the stratum corneum, and so prevents drying and chapping of the skin. Equally important is that it does not alter the skins natural functions. 
Lanolin has been shown to help hold water in the skin build up to its normal
levels of 10-30%. Lanolin has the unique ability to absorb twice its own weight in water.
Lanolin has the ability to improve dry skin areas, and form protective films on the skin.