My understanding is that water obviously helps your body flush itself out. Also, if you hydrate properly, your body will not retain the water for future use.
There are probably more reasons, and my understanding is simple at best...but hey it seems to work. I know that days I do not drink as much, I lose less. If I go back when I have hit a plateau, or even gained....100% of the time, I have not had enough water. There are other things going on as well, water consumption is not the only factor when I stall or gain..but it is consistent.
Going to Hawaii Goal