I kept thinking this reminded me of something...the scene water-breathing scene from the Abyss. The scene with the rat is real: http://www.youtube.com/watch?v=2NmU7VKd3VA
It's awesome how science developments follow their creation in science fiction. Remember Star Trek and their communicators? We have cellphones that surpass those by leaps and bounds...talk about progress.
There are a lot of issues that would have to be resolved before diving with a liquid breathing solution would be practical. (Okay, it will never be practical, but maybe it could at least not kill you.)
* Liquid breathing solutions have to be really, really sterile. You're introducing a liquid past all your defensive mechanisms, and typical immune responses (coughing or sneezing) won't do anything. As a result, immune response/inflammation can be quite severe. This would be hard to maintain in a marine environment.
* Even with a liquid breathing solution, high pressure can still have health impacts. I don't think this has ever been tested (at least not in an unclassified setting), but HPNS (High Pressure Nervous Syndrome) would probably still be a major issue at depths beyond 800-1000 feet.
* It's my understanding that total liquid breathing (as opposed to partial liquid breathing, where only one lung is filled or both lungs are partially filled) will cause a lot of damage to the lung surfactant layer. I'm not sure if this is still the case--human tests with total liquid breathing are very rare.
HPNS is a problem beyond 500 feet when using conventional gas mixtures (Nitrox, Heliox, ...); however, there have been simulated dives to 3500 feet on Hydrox (Hydrogen/Oxygen), which seems to prevent HPNS (I can't seem to find anything more specific about the cognitive abilities at 3500 feet). Hydrox isn't used often.
Diving with nitrox (nitrogen/oxygen) beyond 500 feet is very rarely done, and HPNS isn't really an issue because the overwhelming narcotic effect of the nitrogen would be devastating (think 20 tequila shots in a row). HPNS seems to be caused by rapid changes in the partial pressure of helium, so it can be alleviated somewhat by using less helium and replacing it with nitrogen.
COMEX (a French commercial diving company) has done successful working dives to beyond 1,700 feet on hydroheliox, a mixture of 49% hydrogen, 50% helium, and 1% oxygen. However, there are major practical issues with breathing a hydrogen mixture--namely, if you have hydrogen and oxygen together at high pressure with more than a tiny fraction of oxygen, it will explode. This makes it only practical to use a hydrogen mixture at a depth great enough where 1% oxygen is a high enough partial pressure to sustain consciousness.
Also, hydrogen at high partial pressures is said to have a narcotic effect similar to LSD, but permanent.
The title's a bit misleading, it's not actually water that you'd be breathing.
Water normally doesn't have enough dissolved oxygen
The new suit allows its wearer to breathe a specialized liquid chock-full of oxygen molecules; called a PFC or perfluorocarbon, the liquid can store large amounts of dissolved oxygen.