A baby brings their hands to the middle of their body and into their mouth by around 8 weeks. After this it slowly and persistently develops using the wrist to help position the hand and developing the use of pincer grip with index finger and thumb. Babies are motivated by wishing to grab a toy or object and this leads them to practise these small movements over and over again perfecting the movement and, in the process, they lay down important nerve pathways. Ultimately the hand develops to become a precision tool being able to manipulate buttons, write use tools such a woodwork tools or sewing needles etc.
The baby also gains information about its spatial orientation we call this proprioception. It starts in the womb when they touch the side of the uterus their tactile receptors are activated, and they learn about their body parts starting a map of where their body parts are in space. So having their hands free is an important part of developing this mapping system. The mapping system informs your child about the relative position of their body parts and how to use them.