Periosteum is the tough membrane, several cells thick, that covers most of every human bone. Essentially, the only parts of bones not covered by periosteum are either capped with cartilage or are spots through which capillaries enter the innards of the bone. It contains connective tissue, capillaries and nerves in the outer layers, and various types of cells, including osteocysts and osteoblasts, in the inner layers.
The main functions of periosteum are protection from injury, and the deployment of healing agents if the injury has occurred. Any trauma, even as benign as touching, can cause the periosteum at the site of injury to calcify and become bone, thus protecting from further injury. The blood vessels that run through the membrane are vital to bone metabolism and growth, and the connective tissues, composed partially of ligaments and tendons interwoven within, help stabilize the joints and allow for dynamic movements of the body.
http://aesculapbooks.com/chapter3.html
http://www.rush.edu/worldbook/articles/016000a/016000115.html