You should wrap pulled pork when smoking and even many pitmasters wrap their pulled pork when smoking it.
You can wrap the pulled pork in some foil or butcher paper when the bark is set, which is around 165 F to push through the stall and retain moisture and speed up cooking for juicier results.
Although if you want a thicker bark and deeper smoke flavor for the pulled pork then you should leave the pulled pork unwrapped when smoking it.
The main reason why many people wrap pulled pork or pork butts is to shorten the cooking time.
Using a water pan when smoking foods also helps regulate the temperature as well as add moisture for tender meats and prevents drying and burning during the smoking process.
The use of a water pan when smoking also enhances the smoke flavor by creating humidity which also helps smoke adhere.
The water pan adds steam to the mix and permits a denser air to contact the meat and transfer the heat better.
The humidity from the water pan when smoking also acts as a heat sink and stabilizes temperatures, especially when using offset grills or electric smokers as well as adding moisture to the cooking environment, which also benefits long cook times like pork butt or brisket.
Although some people prefer no water pan for a crisper bark.
Water boils at 212F and acts as a buffer to stabilize heat and prevent large temperature swings, which creates a more stable oven like cooking environment.
The steam from the water in the water pan also keeps the air humid and prevents the meat from drying out during long smokes, which results in more tender and moist results.
The moisture from the water also helps smoke particles cling to the meat's surface, which leads to deeper smoke penetration and a better smoking ring.
In offset smokers, it blocks direct heat from the firebox of the smoker, which protects the food from scorching.
The water pan also catches drippings, which reduces flare-ups and keeps the smoker cleaner as well.
Using a water pan when smoking is best when you are in a dry climate to combat low ambient humidity, for long cooks like ribs, pork butt and brisket and when you are using an electric or pellet smoker to buffer heat and add humidity.
Although if you're wanting a very crispy bark on things like pork belly or poultry, then you may prefer no water pan as it can soften the bark.
Or for shorter cooking's in the smoker, it's less critical for faster cooks.
Instead of water in the water pan, some people use beer, apple juice or broth for subtle flavor, but water is still sufficient.