Thanks, BlazerLT for the post. This is great info.
Personally, I can't see how water can do any damage because by the time it hits your cylinder it is already steam (unless you inject too much). And since H2O is the primary product of combustion, you're doing nothing more than increasing the total amount of it.
I would suggest using distilled water because the lime scale dissolved in water can be a little abrasive and could end up in your oil. And due to the increased amount of water in your system, I would suspect that your oil would pick up a little water if you did not run the car for a fair amount of time afterwards.
BTW: water injection is known to increase the perceived octane of the fuel used. If you could figure a way to meter water in while accelerating, you could run 86 octane gas and your car will think it is 93 octane.