Whenever a person is tickled, feeling cold or experiencing strong emotions, Goose Bumps develops on a person's skin at the base of body hairs. They are created when tiny muscles at the base of each hair, contract and pull the hair erect. The reflex of producing goose bumps is known as piloerection or the pilomotor reflex, or, more traditionally, horripilification.
In humans, goose bumps can even extend to piloerection as a reaction to hearing nails scratch on a chalkboard, listening to awe-inspiring music, or feeling or remembering strong and positive emotions (e.g., after winning a sports event), or while watching a horror film. These bumps are strongest on the forearms, but also occur on the legs, neck, and other areas of the skin that have hair. In some people, they even occur in the face or on the head.
The formation of goose bumps in humans under stress is considered to be a vestigial reflex. In an extremely stressful situation, the body can employ the fighting or running responses. The sympathetic nervous system also causes the piloerection reflex, which makes the muscles attached to the base of each hair follicle contract and force the hair up.
In animals covered with fur or hair, the erect hairs trap air to create a layer of insulation. Goose bumps can also be a response to anger or fear. The erect hairs make the animal appear larger, in order to intimidate enemies. This can be observed in the intimidation displays of chimpanzees, some in stressed mice and rats, and in frightened cats.
Information Source Reference 1