In theory, the red cedar contains compounds that are being
continually released into the air, which are toxic to moth
larvae (hence, might be to bees). So, a cedar lined closet
or clothes chest, prevents your clothes from being eaten by
the critters.

A second theory is that the smell of the cedar compounds is
repellant to the moths, so they go somewhere else to lay eggs
(say, your drapes), hence your clothes are protected - here
there would be no danger to the bees, presuming they like the
smell (people generally do).

I've seen some recent studies that claim the whole thing is
a waste of money -- of course, they recommend some commercial
wax larvae killer be applied to clothes. Personally, I'd rather
smell the cedar and buy a new sweater now and then.

-K