E=V2*1/2M – Energy is equal to Velocity of the line squared, times half the Mass of the line.
The smaller the diameter (mass) in the line, the greater effect air resistance has upon its leading edge. This creates less capacity for carrying the energy and therefore energy gets dissipated.
The greater the loop surface the line presents to the air flow the greater the dissipation of energy. When less line surface is presented, less dissipation takes place. This allows the line to travel farther for a given amount of energy.
This illustration shows an open loop... Because of the amount of surface the leading edge (loop) presents to the air as it travels forward, the line will slow quickly and may not turn over and lay the fly out straight. This is an inefficient loop when attempting to maintain distance or accuracy.
This illustration shows a tight loop. Notice that the leading edge presents much less surface to the air. This efficient loop shape will be more accurate and will travel farther than the jone above, especially into a wind. 
This illustration shows the affects of poor line or leader design. If the energy is not efficiently dissipated there will be too much energy remaining in the line as it turns over. The line will continue to travel in the same direction that it was sent as it turned over, so it continues in a downward direction. The line then drags the leader along with it. On a long cast, the last few feet of the line and the entire leader will end up in a heap as much as 10-15 feet short of it's intended target.

Now lets take a look at the Basics of Fly Line Design.