Hair muscles are called piloerector muscles and in humans we don't get to know them very well. If you get really upset it provides the feeling of hairs standing up on the back of your neck. In animals it helps regulate body temperature and thus homeostasis by orienting the hairs to trap heat better. Air is the best insulator. Fiberglass insulation is the way it is so that air gets trapped amongst the fibers. Air gets trapped amongst the hairs in fur the same way.