The essential idea was developed in the first decade of the last century. The original purpose was enhanced cooling. By 1910 some engines which had been water-cooled were simply produced without water-jackets after addition of 'internal cooling', as water-injection was first called. Those engines had compression ratios around 4:1 and the phenomenon of pre ignition (knocking, pinking) was unknown. Later however this became the main reason for water injection which turns out to give spectacular octane improvement, allowing CR as high as 13:1. By the end of World War II many aero engines used water-injection. German versions used water-methanol mixtures, partly because straight water would freeze in winter.
The Wright Cyclone, a main U.S. aero engine, tested with water and methanol-water (the two liquids being miscible in all proportions, unlike methanol & petrol), showed 50:50 best (as had the Germans). The results were summarised as "high savings in fuel cost - 52% at 100% power, decreasing to 25% at low cruise powers... pure water is approximately equal to fuel when used as an engine internal coolant at high power". Water gained the Corsair (flown by some Kiwi pilots in the Pacific) 350 bhp on its normal maximum of 2100 bhp - a 17% increase. These were supercharged engines, so the results may not translate readily to normal aspiration. Another alcohol, infamous ethanol, was similarly mixed with water before injection, but was not as good.
When Renault attacked Formula 1 with twin turbos cramming several atmospheres of boost into Gordini's 1500 cc V6, they readily achieved 450 bhp, but burned holes in pistons. Then a Kiwi mechanic recalled water-injection; a reliable 550 bhp won the championship. The Saab turbo works rally car at one period had a water tank as big as the petrol tank. Some modern gas-turbine aero engines use water-injection for maximum power at takeoff. Various naval and rail external-combustion rigs are improved by steam injection.