Specific heat.
Different liquids (H20 vs alcohol vs etc....) can hold different amounts of heat before a temperature increase of 1C.
I'm sure someone else can add to this.
*edit*
OH! Also, because water has a high specific heat it manages to absorb a lot of heat (relative to alcohol) before it increases in temperature. This is good because a cooler liquid will absorb heat better than a warmer liquid.
*edit2*
I believe Joe Citarella had showcased an overclocker's article on this subject once. Try looking for it.
"Data on Coolants and Liquids Used in Computer Watercooling"
Scott Gamble, aka r0ckstarbob - 8/10/02