I believe Tesla is asserting that the movement of the water, the 'rubbing,' as it were, of the water against the piping as wall as itself, somehow leads to the creation of voltage within the water.
It's not an unknown concept; something similar happens every time you pump gas. Yet, I've never heard of it being accomplished with simple water. I can only assume the water Tesla used was way too pure, had way too much oil in it - or his meter found a ghost.
