In our ancestral past we descended from animals that had hare all over them (like gorillas and chimpanzees). The hare we have on our bodies is a hang over from that evolutionary past.
At some time in our evolutionary development there must have been some advantage to our ancestors to lose the bulk of that hair (perhaps we swam in water allot or perhaps where we lived was very hot).
We think we know the process by which this happened, it is called 'neoteny' - (the retention, by adults in a species, of traits previously seen only in juveniles). Baby chimps and gorillas have very little hair and this must have been the same with our evolutionary ancestors. One day a baby was born who did not develop the adult hair and this conveyed some advantage which led to that ancestor having offspring that survived to pass this trait on down to us.
The hairs we have do provide some protection an warmth for us and the hair bases are sensitive to movement of the hairs allowing us to feel the wind and when insects land on us.
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