Lanolin falls into the lipid-rich emollient class of moisturizers. One of the causes of dry skin is a lack of lipids, which allows water to escape. Lanolin fills in those gaps, preventing future water escape. It is typically mixed with a humectant, which holds moisture to the skin.
While lanolin is used widely in beauty regimens, it is also well known for use on skin that is cracked or extremely dry. People who suffer from calloused heels and hands can benefit from this oil, as it helps the skin to retain its natural moisture in addition to the moisture contained within the oil.
Lanolin is also popular with people who have reoccurring skin conditions that cause scaling and itching skin, as the moisturizing properties of this oil ease the itching, while making the skin softer. Skin that is dry, cracked, and bleeding from extreme weather conditions can also benefit from lanolin oil, as the moisture barrier it creates keeps the skin from repeatedly cracking and helps to seal in moisture.