On a simple level, it's intercooling and race gas combined. When you inject water and methanol into the intake stream, you cool the air as the liquids evaporate. When you get into the combustion chamber, it slows the flame, acting just like octane. Colder air is denser, and thus contains more oxygen per volume. This will add power to your car. The fact that some of the volume is taken by water particles is neglectable.