Essentially, this is just thermodynamics.
The "liquid" in the liquid cooling is just transfering the fluid to a radiator, which is like a heatsink only if you want it to be useful, it will be like 3 120mm fans long or something like that, which is bigger than any heatsink and has a higher cooling capacity.
It's a bit more complex because the airflow can be better, resistance etc.
Thus you're getting more surface area being cooled and lower temperatures as a result, with lower volume. Generally unless you want a super ultra fast computer it's not worth it, because it's better to invest in better components. As a 300+ dollars in watercooling would better be invested in a better GPU, another GPU etc.
However in your case, it might be worth it, and more importantly ) it's extremely fun to set up.
Pro's Water
1) Maximum Cooling Capacity (meaning everything will have a higher maximum speed)
2) Less Noise
3) A lot of fun to tinker with and looks bad ass.
4) Better temps, thus theoretically longer component life.
Con's
1) A lot of money
2) If you screw up, you can leak on your components and then bam! you're screwed. Also, if pump breaks you can be screwed too.
3) You might be dissapointed if you have something like the NHD14,
Edit
If you want even better do liquid nitrogen, and get a personal assistant to poor it onto your cpu while you're playing :P.
http://www.youtube.com/watch?v=B46J1-e8Cqg
