I'm probably asking for a beatdown....

But...Something that my friends and I have been arguing about is the purpose of water-cooling and over-clocking ones computer. I have been into building my own computers for a decade now, and I just don't understand over-clocking. In my mind I see it like using a u-haul for grocery shopping, like using a hummer to drive kids to school. Its cool, but I don't understand its purpose.
Someone asked me if I water-cooled my system. First off I can't, but if I could I wouldn't. I don't over-clock, and my computer never overheats. They are extremes I don't understand. I.E. my friend insists on using a CRT monitor, he insists that the picture tube is more responsive. He also refuses to use a wireless mouse.
I don't want to confuse water-cooling and over-clocking. You can defiantly have one without the other, but it seems that they often coincide. Ergo, to all the gamers that are probably screaming by now and reading furiously to finish so they can pounce upon me. Is over-clocking and water-cooling coming out of desperate necessity, or from a male egoist response to wanting the best.
I understand wanting the best, I browse the internet, and use aim on a really nice computer, so I was wondering what I could be missing. Why do you guys use it, and what for? Or it is a merely an excess?
Does the performance of the computer greatly change, what kind of damage does it do long term. What are the risks? Please clarify this for me, I would greatly appreciate it. I am simply asking this quite aesthetically, so please respond as epistemologically as possible without biting my head off.
~Thanks