In internal combustion engines, water injection sprays water into the incoming air or fuel-air mixture, or directly into the cylinder where "hot points" could produce premature ignition.
Water injection has been used in motor sport and notably in drag racing. In Otto cycle engines the cooling effects of water injection also allow for greater compression ratios by reducing the problem of engine knocking (detonation). Alternately this reduction in engine knocking in Otto cycle engines means that in some applications significant performance gains can be obtained when water injection is used in conjunction with a supercharger, turbocharger and/or other modifications such as a more aggressive ignition timing.
Depending on the engine, improvements in power and fuel efficiency can also be obtained solely by injecting water.
Water has a very high heat of vaporization. As the ambient temperature water is injected into the engine, heat is transferred from the hot cylinder head/ intake air into the water. This causes it to evaporate, cooling the intake charge. A cooler intake charge means it is more dense (higher volumetric efficiency) and also will have a lower tendency to knock. However the water vapor will displace some air, negating some of the denser intake charge benefit. Knocking is generally more of a problem in forced induction engines rather than naturally aspirated so this can be a useful aid in its prevention. On electronic ignition systems the ignition timing is generally retarded to prevent knock from occurring but with water injection it can be advanced closer to Maximum Brake Torque (MBT) timing for additional power.
Composition of fluid
Many water injection systems use a mixture of water and alcohol (often close to 50/50), with trace amounts of water-soluble oil. The water provides the primary cooling effect due to its great density and high heat absorption properties. The alcohol is combustible, and also serves as an antifreeze for the water. The main purpose of the oil is to prevent corrosion of water injection and fuel system components; it may also assist in engine lubrication when running in a high power state. Because the alcohol mixed into the injection solution is often methanol (CH3OH), the system is known as methanol-water injection, or MW50. In high performance automotive applications some tuners use 100% methanol as opposed to a water-methanol mixture and then referred to simply as "methanol injection". Safety concerns and part longevity concerns keep this as a controversial option. - Extracted from Wikipedia