While the layer of insulation does serve to separate your warm body from the cold air, the most important job of insulation is to retain heat. When heat is produced by your body it is rapidly lost to the surrounding air, and if this heat can be trapped we are kept warmer. At a lunch stop on a cross country ski trip it is very important to put warm clothes on before the body's engine slows down and the amount of heat it produces is diminished. The body produces heat by metabolizing food, so you must feed the fire if you wish to trap heat in your insulation. It is as simple as that - eat often and well.
Water is a very important factor in maintaining good circulation.
Dead Air Space Insulation in outdoor gear creates a barrier to the escape of heat by trapping air within its structure. Air is a very efficient insulator as long as it is not moving. To prevent the wind from disrupting the trapped air in the insulation and keeping it dry, a windproof and waterproof layer of fabric needs to cover it. Limitations of Insulation Insulation varies in its efficiency and this is certainly a factor that plays upon how warm you feel at any given moment, but there are other factors that conspire to reduce your insulation's effectiveness. As mentioned before, dry insulation is a better insulator than wet, and insulation protected from moving air is also more efficient.