It is a commonly held believe that hair dryer is damaging for hair and letting hair dry naturally (air drying) is better for the hair. However, research by a group of Korean doctors has contradicted this believe.  

The research found that by drying hair 15cm away and in continuous motion causes less damage than air drying hair. It is found to be true hair dryer damages the surface of the hair the closer the hair dryer is to the hair, the cuticles shows more obvious lifting and cracking the closer the hair dryer is to the hair. Even at 15cm away, multiple longitudinal cracks were observed in the cuticle. These signs were not observed in air dried hair.

The hair cortex showed no signs of damage for both hair dried hair and air dried hair. Both methods it seems does not cause structural damage to the cortex.

While air drying leads to well-preserved surface hair, the cell membrane complex (CMC) showed signs of damage (exhibited bulging). This damage to the CMC only occurred for the air dried hair and not in any of the hair dried groups. CMC is a pathway for water molecules through the cuticle into the central cortex. The study stated it takes around 2 hours for hair to dry under ambient conditions. It speculates that the CMC could be damaged when it is in contact with water for prolonged periods.  

As to the moisture levels of hair, the study found while moisture decreased for air-dried hair and hair dryer dried hair, that there are no statistical differences between them.

While hair dryer causes damage to the surface, letting hair dry naturally causes damage to the CMC. This weakens the hair which could lead to breakage and split ends.

To minimize surface damage to the hair by a hair dryer, hold it a good distance away from the hair and moving in continuous motion. Avoid aiming the hair dryer on the roots for added measure.