Milk actually works pretty well, especially whole milk (the fat, again, as suggested). The essential ingredient that makes peppers hot is capsaicin, which is an oil contained mainly in the inner portion of the pepper skin (not in the seeds, as some may think). It is insoluble in water, which is why washing with water doesn't help. Your body's own oils will eventually take care of the problem, but in the meantime,for a few minutes, it's uncomfortable. Particularly if you get in in your eyes.
A swig of milk will also alleviate mouth-fire from peppers. And beats a swig of olive oil.
caw