Basically, your average heat sink works like this. Your processor gets hot, so it transfers heat to the metal in your heatsink, which in turn gets rid of its heat by passing heat to the air. This is rather inefficient because air has a low SPECIFIC HEAT. Specific heat is the amount of energy required to heat (either a gram or a mole, doesn't matter) of a substance 1 degree celcius. This means that ALOT of air must pass around the heat sink for it to work (why people have fans)
The way water cooling works is instead of heat going from processor->sink-> air, is it goes from processor->watercooling block(basically same thing as heatsink)->to WATER. water is better than air because it has a higher SPECIFIC HEAT. This basically translates into better cooling, because when a molecule of water passes over the cooling block, it takes away MUCH more heat than a molecule of air would.
If you dont understand this specific heat stuff, think about this. Would you rather go outside on a day in 0 degree air, or jump into 0 degree water. Probably the air, unless you wanna die of shock, because air cant take the heat from your body as fast as water can.
But to answer your other questions, water cooling cools HDDs and vid cards by either a.) replacing the stock sink
b.) Adding a sink ontop of whatever you're cooling.
then, tubes connect all the blocks together, and a pump pumps water thru all the blocks, and usually (always?) there is a device to cool the water
Unfortunately, i dont have the cash for watercooling, so I cannot answer your question about which kits to buy.
I hope I answered your question
Mac G4 Conversion
Mac G4 Case
AMD AthlonXP 3000+
Biostar MicroATX KT400
512Mb Crucial DDR
Radeon 9600 Pro 256mb
Total Build Time: 23 Hours
Current System Specs
Tsunami Black Case++--
Radeon x800 Pro 256mb PCI-e
1.5 Gb DDR400