Liquid cooling gives better results than Air, but this comes at a price.
The lowest end of water cooling that comes in kits will only cool the cpu a tiny bit better if not the same than high end air cooling.
However if you spend a decent amount of money on a set up, you will get noticable better temperatures under water.
With water cooling you have a much smaller 'delta' in your idle and load temps. This means the gap in temperature increase is much smaller than on air.
I dont know why liquid cooling cools better than air, but many people would argue that it does.
Air cooling is suitable for almost any computer set up, water cooling is realy just for heavy overclockers, people with money and poeple who want it.