Licking your lips is bad for two reasons. First off, while you may feel like it wets them down and tosses them some much needed moisture, that's not the case. Lips either have an extremely thin or entirely absent protective outer layer, which makes them particularly vulnerable to liquid loss. So saliva evaporates from lips very quickly -- quicker than it would if, say, you felt like licking your arm -- and that can leave your lips feeling drier and worse off than they already were.
The second reason is a little more dramatic. Saliva isn't as innocent as it looks. It's a key early component of your digestive system and it's packed with enzymes that specialize in breaking down foods. Unfortunately, gentle lips are also susceptible to this digestive action, and an overabundance of saliva can cause the skin on your lips to crack.