1. Reasons for Lubrication
1) Reduce Friction
2) Reduce Wear
3) Dissipate Heat
4) Clean System (Dependant on type)
5) Prevent Corrosion

2. Reduce Friction and wear
The top magnified image shows two components in
contact without Lubrication, as you can see the peaks
and troughs are making contact, so as they slide across
each other the shearing action causes friction resulting
In small particles being broken off so wear takes place 
The magnified image below shows the two components
with a film of lubrication between them so peaks and
troughs are not in contact with each other resulting in 
Less friction and wear when they slide across each other

3. Dissipate heat and clean system
In some systems such as internal combustion engines, lubrication such as oil is filtered and pumped round a system then returns to a reservoir/sump
As the lubrication makes contact with moving parts some heat is transferred to the oil.
When the oil flows back into the reservoir/sump this heat is dissipated through the walls to the atmosphere so cooling it down
This process also dissolves carbon deposits from the combustion process and flushes them down into the sump along with small particles of metal where it settles

4. Prevents corrosion
When Lubrication comes into contact with components it adheres to the surface providing a protective film.
This protective film prevents the effects of oxygen and water reacting with the components resulting in Oxidisation
The higher the viscosity of the lubricant the more adhesive it is so providing better protection