Lung tissues remaining protected inside the body keeps them from drying out or being exposed to potential injury and infection. They also create a more effective respiration cycle in the given environment.
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Terrestrial animals live in a dry environment compared to aquatic ones, even in places of high moisture and humidity. They are also more subject to potential trauma or exposure to other irritants or pathogens. Additionally, the circulation of air through the lungs of terrestrial animals is necessarily very different from the circulation of water through the respiratory structures of aquatic animals; external structures on land would be highly ineffective.