This site really explains it very well:
but here is the watered down wikipedia shiit:
"Liquid breathing is a postulated form of respiration in which a normally air-breathing organism breathes an oxygen-rich liquid (usually a perfluorocarbon), rather than breathing air. In theory, liquid breathing could assist in the treatment of patients with severe pulmonary or cardiac trauma, especially in pediatric cases. Liquid breathing has also been proposed for use in deep diving and space travel. Despite some recent advances in liquid ventilation, a standard mode of application has not been established yet.
Liquid breathing is sometimes called fluid breathing; but, this usage can be confusing as both liquids and gases are fluid substances."
Humans can breathe underwater