Exhaust gas becomes less dense as it cools. Hot gas passes through a given pipe more easily than the same mass of cold gas, so keeping the gas hot means the system behaves as though its cross-section were larger. The effect is continuous along the run, which is why it is discussed as a property of the whole system rather than as a single-part upgrade.
This is the difference between fitting an exhaust heat blanket to protect a component and fitting one to change how the exhaust behaves. The first goal is local, the second is about the whole run from the manifold to the tailpipe. Both use the same material, but they call for different amounts of coverage.
The heat has to go somewhere. Energy that would have radiated from the surface is held against the metal instead, so a covered pipe runs hotter than an open one, and so do its welds, hangers and joints. The wall sees more thermal cycling, and every support with a flexible element sees more heat conducted along the pipe.
Material choice matters here. A titanium exhaust system suits wrapped runs because the material is used at modest wall thickness and does not rely on mass to survive the temperature it carries. Stainless behaves well too, provided the grade and the wall are chosen for the duty rather than borrowed from a cooler part of the same car.
Once the system is hot, a wrapped run holds its temperature along the pipe, so the gas arriving at each joint is hotter than it would otherwise be. Drivers describe the car as more consistent pull to pull, because the exhaust behaves the same way whether it is under sustained load or in the first minutes of use.
Cold-start behaviour is different. Before the pipe is up to temperature the wrap makes little difference to the gas, though it does slow cooling after shutdown. That is why the effect is usually described in terms of steady-state behaviour rather than of anything you would notice on start-up.
Long runs with tight packaging gain most: a rear-engined car with a long, tortuous path behind the engine, or a front-engined build where the exhaust crosses the whole car. Short systems with generous pipe diameter have much less to gain, and the protection argument usually becomes the stronger reason to cover the pipe in those cars.
Turbocharged applications are another case where the reasoning is well established, though the reason is as much about where the heat is as how much of it there is. Keeping heat upstream of a turbine means it arrives at the housing rather than in the surrounding bay.
Covered pipe is hotter pipe, so anything that touches it has to cope with more: a hanger, a bracket, a nearby sensor. Fasteners can seize over time. The material also stays hot for longer after shutdown, which puts more of a soak load on whatever the pipe passes close to. And the pipe cannot be inspected without removing the wrap.
Weight is modest but not zero, and on a system already built light, adding material along the run is worth counting before deciding how far to cover. Where the case for wrapping is protection, cover the sections that need it and leave the rest open.
Start with the sections where heat is causing a problem, then add the sections where holding gas temperature supports the way the car is used. An exhaust heat blanket over the downpipe and the first part of the mid-section, with the rear of the system left open, is a common compromise that captures most of the effect.
Keep the decision specific to one car and one use. A road car with occasional track days has different priorities from a competition car with a fixed exhaust layout, and the amount of coverage should follow that difference rather than a general rule about wrapping everything.
