How does lotion and creams help moisturize my skin?

Creams help skin. Creams are better than lotions for skin. Creams help the skin retain water or hydrate the skin which keeps it from drying out. If your skin becomes too dry, it becomes itchy and can develop a variety of rashes and may crack and or bleed and become infected. Good hydrated skin prevents these problems.
See below. Healthy skin is designed to maintain the proper amount of moisture. Many factors including age, genetic, and environmental factors can make the skin barrier less effective. Most moisturizing lotions and creams act by helping to restore this barrier and lock moisture in. This is why it is important to moisturize after shower or bath when skin is damp.

Related Questions

What is recommended for sensitive skin (atopic dermatitis) for daily use after work outside (cream, lotion moisturizer, or ointment)? which brand

Atopic dermatitis. There are a lot of choices. Eucern, Cephadil, Aveno, Lubiderm, basically any cream with glycerin as the active ingredient should be adequate. Read more...
No specific brand. Eczema is allergy in the skin and is best treated by a dermatologist/allergist. Use mild soap like dove,pat dry the skin after bath and you can add aveno to the bath .You can use !% hydrocortisone ointment to apply over the skin and take benadryl (diphenhydramine) at night to avoid itching !Consult your physician for further management specific to you. Read more...