Because guitars are made mostly out of various types of wood, the playability and tone of the instrument can vary greatly depending on the condition of its components. When the wood of the body and the wood of the neck dry out, they may contract. However, since they are often different types of wood, they contract at different rates, thereby causing warping or cracking. This can damage the instrument and adversely affect its tone and playability. Therefore, inserting a guitar humidifier into your guitar while it is in its case can prove to be an extremely wise decision.
A guitar humidifier keeps the wood of your guitar moist enough that it will not warp or crack too dramatically. They come in several different forms, but most often the guitar humidifier utilizes a long, thin sponge encased in latex or other plastic, which is then moistened with tap water and inserted in between the strings of the guitar. On an acoustic guitar, the guitar humidifier extends down into the body of the instrument, allowing low levels of moisture to radiate throughout the cavity.
Other forms of guitar humidifiers achieve the same desired effect but with less effort or investment. For example, taking a damp rag and tying it in a plastic bag, then poking holes in the bag to allow moisture to escape, can be effective for electric guitars. Simply place the bag inside your guitar case along with the guitar, but be sure not to over-moisten the rag or mold can grow inside the case and on your guitar.
Just as drying the wood of the guitar can affect the tone and playability, so too can over-humidifying your guitar. If you live in dry climates, this may not be an issue and a guitar humidifier must be used fairly constantly. However, in damper, cooler climates, a humidifier may not be necessary at all and can, in some cases, do damage to your guitar. Mold can grow on frets and electronics, and the wood may soften too much, again affecting the tone and playability of the guitar.
It is best to consult your local guitar shop for their recommendations, but generally, if you live in dry climates or plan on taking your instrument on the road, a guitar humidifier is a necessity that will keep your guitar in great shape, allowing for stellar tone. They are inexpensive and will save you money on repairs later on down the road.