Heat flows naturally from a warmer to a cooler space. In winter, heat moves directly from all heated living spaces to adjacent unheated areas (attics, garages, etc.) and the cooler outdoors. To maintain comfort, heat lost in winter must be replaced by your heating system. In the summer, heat moves from the hot outdoors to cooler home interiors. Fans, swamp coolers, and air conditioners can reduce heat, but ceiling, wall and floor insulation provide resistance to heat flow. The more heat flow resistance your insulation provides, the lower your utility bill. Proper moisture control and ventilation will improve the effectiveness of insulation — and vice versa.

The R-Value of Insulation
Insulation's resistance to heat flow is measured or rated in terms of its thermal resistance or R-value. The higher the R-value, the better the thermal performance of the insulation. Installing more insulation in your home increases the R-value and the resistance to heat flow. The R-value of thermal insulation depends on the type of material, its thickness, and its density. To calculate the R-value of a multi-layered insulation, just add the R-values of the individual layers.
The effectiveness of insulation's resistance to heat flow also depends on how and where the insulation is installed. For example, insulation that is compressed will not provide its full rated R-value. The overall R-value of a wall or ceiling will be somewhat different from the R-value of the insulation itself, because some heat flows around the insulation through the studs and joists. Therefore, it's important to properly install your insulation to achieve the maximum R-value.
The amount of insulation or R-value you'll need depends on your climate, type of heating and cooling system, and the section of the house you plan to insulate.
Source Material: US Dept. of Energy