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By eliminating solid-solid sliding contact. A solid is defined as a material that can support shear (lateral force). When two solids come into contact, imperfections in the surface interfer with each other and resist slide by their shear strength. Liquids or micoscopic balls of graphite (dry lubricant) flow or roll to reduce shear forces the result in friction.
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Because it makes surface smooth and there is less friction on smooth surface