This is a highly technical subject, but basically the lack of an insulation vapour barrier can lead to serious damp problems. It applies particularly to internal insulation. If you want to skip the technical details just remember that with internal wall insulation it is essential to seal the room facing surface of the insulation to stop water vapour getting into the back of the insulation or into the wall and causing damp. This type of damp and any condensation that can’t be seen is known as interstitial condensation and can cause all manner of problems in buildings.
When you apply internal insulation to an outside wall the wall becomes colder (for the 11 months of non-summer in the UK). This creates a danger that warm water vapour from inside the home created by showers, washing machines, electric kettles and human breathing will get behind the insulation, and as it cools it can condense on and inside the wall fabric in the same way that you get condensation on the surface of single glazed windows. To prevent interstitial condensation from remaining in the wall it is essential that water vapour can pass out through the wall more easily than it can enter from inside. This is particularly important, to prevent wet or dry rot, in timber frame construction and where timber battens are attached to the wall to secure the insulation. The better your insulation the colder the wall behind will be, so the more important it is to prevent excessive moisture entering it.
So what is it? It is a very simple component like a huge sheet of polythene film that is simply tacked onto the timber studs and then taped to make 100% sure that no moisture laden air can find a way through it. At this stage it is crucial that any holes in the membrane caused by cables or pipes that have to be pulled though must be sealed with appropriate tapes to ensure a complete air-tight barrier.