It looks like this thread may have been dead for a while, but I thought I might throw something in. I was a missionary for the LDS church for two years, and realize everyone likes to give their own answer to this question. Personally I like referring directly to the passage in question.
1 A Word Of Wisdom, for the benefit of the council of high priests, assembled in Kirtland, and the church, and also the saints in Zion—
2 To be sent greeting; not by commandment or constraint, but by revelation and the word of wisdom, showing forth the order and will of God in the temporal salvation of all saints in the last days—
3 Given for a principle with promise, adapted to the capacity of the weak and the weakest of all saints, who are or can be called saints.
4 Behold, verily, thus saith the Lord unto you: In consequence of evils and designs which do and will exist in the hearts of conspiring men in the last days, I have warned you, and forewarn you, by giving unto you this word of wisdom by revelation—
5 That inasmuch as any man drinketh wine or strong drink among you, behold it is not good, neither meet in the sight of your Father, only in assembling yourselves together to offer up your sacraments before him.
6 And, behold, this should be wine, yea, pure wine of the grape of the vine, of your own make.
7 And, again, strong drinks are not for the belly, but for the washing of your bodies.
http://scriptures.lds.org/en/dc/89
My explanation, as I said everyone has their own, is that the church had many enemies, and they were warned against being poisoned. Regarding the whole thing about our water being more pure than before, I submit that that premise is false. Jesus drank from wells, and many people used those wells, which is still the purest form of water. Look at what we have to do to our water now just to make it "safe." I would rather drink water from a well than city water anyday.