Hydration is the act of rehydrating your skin, i.e. giving it the water it requires to stay plump, healthy and in excellent condition.

Nourishing your skin is feeding your skin on a cellular level, supplying nutrients that penetrate and deeply nourish your skin.

Skin care products, in particular moisturisers, are made up of three important components.

Firstly you have the aqua content.  This is the part that hydrates your skin.   However it does not penetrate into the deeper layers of your skin and only gets into the epidermal layer.   To keep skin hydrated it is best to drink plenty of water and herbal teas so that your body doesn’t draw out water from your skin leaving your skin dehydrated.

Secondly you have the rich ingredients such as the butters, oils and waxes.  These ingredients protect your skin from harsh elements like wind, sun, rain, air conditoning etc.   Some ingredients are more rich than others such as cocoa butter, shea butter, wheatgerm and rosehip oil.  You’d look for products that suit your needs depending on skin type, skin condition and what protection your skin needs.
For example lanolin is very protective against sweat which is why it is beneficial for rashes and itches.

Thirdly you have the active ingredients such as essential oils (in the case of natural skin care) and fancy man made ingredients such as acetyl hexapeptide-8 [Argireline] and others (in non natural skin care).  These are the ingredients that absorb into the deeper layers of the skin and do their magic: soften wrinkles, reduce fine lines, combat dryness, heal wounds, alleviate ailments, replenish and rejuvenate your skin.

To sum it up it works like this: the water component hydrates the skin while the butters, waxes and oils coat the skin in the protective layer and also keep the water component on your skin, and the essential oils actively soak into your skin to do their magic on a cellular level.