Warm indoor air holds moisture, and when that moisture reaches a cold surface inside a wall or ceiling it condenses — feeding rot and mould you can't see. Vapour and air control layers manage where that moisture goes.
Which side does it go on
In cold Canadian climates, the vapour retarder goes on the warm (interior) side of the insulation, so indoor moisture can't drift into the cold wall cavity and condense. Putting it on the wrong side, or sandwiching insulation between two barriers, can trap moisture and cause damage.
Air sealing vs vapour control
Air leaks move far more moisture than vapour diffusion, so a continuous, sealed air barrier matters even more than the vapour retarder. Polyethylene sheet, sealed properly, can serve as both in many assemblies.
Renovation cautions
Be careful adding a second barrier during renovations, finishing a basement, or insulating an old wall — you can trap moisture against materials that need to dry. When in doubt on an existing assembly, consult a building envelope professional.