This idea, introduced by Justus von Liebig around 1850 and later embraced by contemporary cooks and cookbook authors, is not true. Simple experimentation showed that seared roasts lost the same amount of moisture or more.
- High temperature browning of the surface creates desirable flavours through caramelization and the Maillard reaction.
- The appearance of the food is usually improved with a well-browned crust.
- The contrast in taste and texture between the crust and the interior makes the food more interesting to the palate.
To learn more on this subject:
von Liebig, Justus. 1850. Researches on the Chemistry of Food.
McGee, Harold. 2004. On Food and Cooking (Revised Edition). Page 161, "The Searing Question".
Searing in Wikipedia.
Does Searing Meat "Seal In" Juices? More controversial materials in About.com Culinary Arts.