Short answer
Inner envelopes are optional and hold the invitation and enclosures. They are left unsealed and addressed informally, for example 'Sarah and Tom', without first names or titles on the outer envelope.
Inner envelopes are a traditional extra layer, not a requirement. They sit inside the outer envelope and protect the invitation from smudges and tears. You address them informally: just the guests' names, such as 'Sarah and Tom' or 'Mr and Mrs Smith' if you prefer a little more formality. Children who are invited can be named on the inner envelope, even if the outer envelope only names the adults. The inner envelope is never sealed, and you place the invitation face up inside it, with any enclosures tucked behind. If you are having a single envelope only, you can skip this step entirely. Many couples find inner envelopes useful when inviting families, because you can list each invited child by name without cluttering the outer envelope. They also let you be clear about who is invited, which helps guests understand whether children are welcome. If you are not sure about including inner envelopes, think about your budget and how formal you want the wedding to feel. They are a lovely touch for a traditional wedding, but perfectly fine to leave out for a modern or casual one.
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