Small creatures such as the hydra, pictured on the right, as well as single celled organisms obtain all their oxygen requirements through simple diffusion. Oxygen and carbon dioxide move through the cell membrane to provide each cell with enough oxygen to undergo respiration. Bigger and more complex organisms can not possibly obtain enough oxygen by simple diffusion.

These organisms do not have enough surface area to allow for the exchange of an adequate volume of oxygen and carbon dioxide.
Lungs have evolved as structures that specialise in exchange of gases between the blood and atmosphere. Lungs significantly increase the surface area available for gases to pass through.