Each and every piece I knit has to be hand-washed before being dried and finished. The washing helps rid the piece of excess dye but more importantly it washes out the lanolin from the yarn.
Lanolin is the natural grease found in the wool, it helps protect the sheep (or goat) from the elements and any insects. In turn, it helps lubricate the yarn when being run through the domestic knitting machine and knitted.
After washing and drying the yarn is so soft and gently felted together for a slightly denser fabric.
For the sake of reducing my water usage I try and hand-wash a batch of pieces at the same time, the other day I had a big pile of Essential Beanies ready to be washed and dried before sewing up their tops and tidying away the ends.
That is when Wool meets Water.