Sheepskin is quite resistant to getting totally wet. You can get caught in a shower with your sheepskin boots, and on the outside they will appear considerably wet but on the inside you are warm and cosy. This is because not only does the rain have to soak through the thick skin, but it must also penetrate the 5mm (or more) wool on the inside. If you leave them somewhere away from direct heat (and more rain) they will dry naturally.
However, sheepskin is a soft leather and as such can not withstand rainy, snowy or slushy conditions for very long. Don’t let anyone else tell you otherwise. Some competitors claim that sheepskin (remember – it’s a soft leather) can withstand rugged conditions but all your are likely to do is get them snagged and end up with a hole in them. If you want to go hiking, choose a proper, solid hiking boot.