Humans, microbes (bacteria, viruses, fungi), and plants all react differently to dry ambient conditions. Microbes adapt quickly by shrinking down, forming thicker membranes, and becoming dormant. Plants simply wilt. Humans, however, are in a tough spot because our structure, the endoskeleton, buried inside our bodies, prevents us from shrinking into spores or wilting when we lose water. Instead, the surface layers of our body that are exposed to dryness dehydrate and develop micro-cracks. These exposed surfaces are our skin, airways, and eyes. Our internal organs also become dehydrated and lose some percentage of their function. None of this is good for us.
When water is sapped from our bodies and we do not keep up with replacing the fluid loss, our kidneys try to limit the imbalance by concentrating our urine. This definitely helps but does not protect us from the consequences of dry ambient air.