When wood burns, it produces heat and a set of byproducts. The two main products are tar and carbon powder, which is popularly known as soot. These have light particles which are released up the chimney as the wood burns. The two types of particles get mixed and form a substance called creosote. Some of the creosote goes out of the chimney, but a large portion of it gets built up on the walls of the flue. As you keep using the fireplace, more creosote gets accumulated and the layer becomes ever thicker.