Washing machines soak clothes in water and detergent and tumble them with each other. This tumbling action along with the clothes rubbing against each other and the walls of the drum is what dislodges the dirt from them and cleans them. This process inevitably causes wear to clothes and turning them inside out helps a bit with reducing the wear on the visible exterior of a piece of clothing, though of course it will still rub against itself a bit in there. It also exposes and cleans the fabric that actually touches your body.
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