If wool keeps sheep warm in the winter, it makes sense that it would keep humans warm as well. But is wool a better insulator than cotton? According to a simple experiment performed by Scientific American, it most certainly is.
The underlying structure of wool is composed of scaly, rough fibers that are tightly wound together. Cotton is also a collection of tightly wound fibers, but with much smoother surfaces. In dry conditions, wool is only slightly better at preserving warmth, but when both materials are wet, wool offers much better insulation because those scaly fibers allow for more air pockets to remain within the fabric. These air pockets are instrumental in keeping warmth from escaping through the material.