After watching the Water Touch Screen video I was expecting to read that there was tons of sensors monitoring disturbances in the water, or changes in pressure due to the introduction of the users fingers. Was I ever wrong, turns out that a Web Cam and some carefully crafted software is all the magic that was needed here!
Via: Neatorama
“The webcam takes a picture of the surface of the water from the lower side. At this time, only when the finger has invaded water, the finger will be seen from the camera because total reflection is caused under the surface of the water. Color tracking system on Max/MSP+Jitter finds coordinates where the finger appears and produce the cursor move and click. Distortion of image because of taking a picture from diagonal are adjusted by affine transformation.”