From the article:
QUOTE
The water cooled term is being used loosely; actually it is a heat sink constructed of a copper base, aluminum stamped fins and copper heat pipe. The heat pipe contains water and a vacuum is pulled on the pipe prior to sealing.
Water under a vacuum boils at a lower temperature than at atmospheric pressure, so when the water boils and becomes steam, the steam rises and moves the heat higher into the fins where the air flow from the fans can extract the heat more efficiently. Once the steam is cooled it condenses and flows back down the pipe as water to the copper base of the heat sink, which is attached to the processor to continue the condensing and cooling processes cycle.
This sounds like the cooling effectiveness of the heat sink will be much greater when the console is in horizontal placement, since gravity is required to draw the condensed water back to the base of the heat sink. I don't see how this could work very efficiently in a vertical orientation, and even though Reents claims they applied for a patent on this thing, it doesn't seem to be on the USPTO site. Patent #6,867,985 is the closest I could find though, if anyone is interested.