Here is what Methanol/Water injection does.
Water Injection, or water/alcohol injection, acts as a highly effective gaseous intercooler. The only reason for an intercooler is to cool down the hot, compressed air from the turbo. Water can do this job far better because it has a very high property of Latent Heat of Evaporation, 500+ BTUs compared to gasoline's 135 BTUs and alcohol's 470. If you need an extra bit of fuel, a 50-50 ratio of alcohol to water strikes a good balance between the maximum anti-knock capability of water and maximum supplemental fuel."
The net result is1) Cooler intake charges (similar to what a bigger intercooler does) 2) Steam cleaning your head and valves 3) Drastic Reduction in knock/detonation. Since it reduces knock/detonation, your engine will advance timing (or you can manually advance the timing, thus making more power (similar to running higher octane gas). Does it work? Heck yeah it does! You'll be able to run more boost, timing and get far better and more consistent performance from pump gas.
http://www.turbomirage.com/water.html
Water/methanol injection (aka water, meth, alcohol injection) works on a simple concept. As turbochargers and superchargers pump higher boost, the pressurized air that comes out of the compressor becomes hotter, which causes power loss and decreases the engine's knock threshold. When intercooling doesn't extract enough heat out of the intake air charge, the next step is to directly spray a mix of water and methanol into the air to extract heat. You could use water, but it takes up space and reduces the amount of total air going into the engine. Pure methanol (or methyl alcohol) would absorb more heat, but it also acts as a fuel, which significantly changes the overall air/fuel ratio. So a 50/50 mixture of water and methanol is used to provide the best of both worlds in terms of charge cooling and allows an engine to make more power with the same boost but lower charge temperatures. The overall effect is like running much higher-octane fuel, which can allow for more boost, ignition advance and a leaner A/F ratio, which reduces the possibility of spark plug misfires.
http://www.modified.com/tech/m....html