The concept of using water to cool your computer is not all that different from how the engine in your car is cooled. It is pretty simple to understand, there is a reservoir that holds the fluid to cool the cpu, it is pumped into a block that is attached to the cpu, the heat transfers from the cpu to the block and the water absorbs a fair amount of the heat that is produced. The heated water is then passed into a radiator where it is cooled down with the help of a fan. In theory water-cooling should provide more efficient cooling than a standard air-cooled solution with minimal noise.