My guess is that he is hydrolyzing the water into hydrogen and oxygen and feeding these gases into his carburator or fuel injector. SO e is taking energy from the generator to make more fuel for the engine.
In this Fox Report, it is said that the gas temperature will go up as high as the surface of the Sun.
http://www.freeenergynews.com/Directory/BrownsGas/WaterFuel.wmv