How to stitch together two fabric pieces without creating "lips" Take a look at the stitches of this doll. It is sewn so that the shift from the upper fabric piece to the lower one is very smooth:

Compare it with this kind of sewing: The shift from the two fabric pieces is salient, and looks kind of like "lips", or a "vally":


What I'd like to know is how to achieve the former sewing style with hand-sewing.
The first one is a machine technique known as flat lock stitching. A machine stitch found on a home sewer that could be used as an alternative would be the three part zigzag. 
Many of the hand stitching techniques are being lost due to the speed of the machine stitches. 

Stoating is a technique I have read about and is very challenging to do by hand.
Here is a link that might be of some interest on stoating: 
https://books.google.com/books?id=k15YAAAAYAAJ&amp;pg=PA343#v=onepage&amp;q&amp;f=true