Connecting flights the luggage should make it to your final destination. You do not have to pick it up and carry it there.
What happens when your luggage actually gets lost? I can speak from experience on this subject. The first think you should do is go to the baggage counter for your airline right after you get off the flight where you lost your luggage.
They will ask for what your luggage looked like and want to have your luggage id number which they give you when you check your bags. Remember to keep this with you. You will also need to identify how many and what your bag looks like. They will give you a phone number and web site where you can view if they have found your luggage.
Some airlines may give you extra necessities such as shampoo and conditioner free of change.
If they find your lost luggage they will deliver it to your where ever you are staying at any time of the day or night. If they do not find your luggage in a certain amount of time you will need to fill out a lost luggage form and mail or fax it in. I was told that it would work better if it was faxed. A few weeks later you will receive confirmation about your lost luggage and what they are going to do to reimburse you. US Air paid for my luggage and contents as well as gave me percentages off of a future travel date.