Furring creates an air space between the back of the siding and the house wrap. I think the idea is that it helps dry things out after a rain. These are just 1/4 inch by 1.5 inch strips of wood that go over the studs and around the trim.
In the next picture you can see the outside vent of our on-demand, propane hot water heater. The flange around this appliance didn't allow for a flush mount, so to accommodate some flashing that will help keep water from getting in around it, I went ahead and put trim around it just like the windows.
Siding is next!
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