I think lanolin may act as you said - sealing in moisture.  Lanolin's claim to fame in healing nipples probably stems from the over 55 years of LLLI advice to use lanolin on your nipples if sore.
I know there are various research articles on healing sore nipples with all sorts of concoctions tried.  But lanolin seems to occupy a steady place in nipple healing as other things come and go.  Personally I like saline soaks for damaged nipples, then air dry and use lanolin.  Thankfully I don't seem to get as many moms with awful nipples any more.  Better positioning has slowly crept into the hospitals and is solving some of the terrible problems I used to see.  Pat in SNJ

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