Water is not unique to Earth, and though it's not abundant in our solar system, it's certainly not the rarest compound either. Within the last year, some rather solid evidence has recently been revealed that gives more credence to the idea that liquid water was at one time present on the surface of Mars. About six months ago, gullies and rills were imaged, from the Mars Global Surveyor, that were likely carved by running water, perhaps within the past 1,000 years. In addition, just this week, new observations released from the Mars Global Surveyor provide evidence that Mars had lakes and maybe even seas of liquid water more than 3 billion years ago. The high resolution images show sandstone-like cliffs that appear to consist of fine grained material in a number of horizontal layers.
Different layers means that water ebbed and flowed over millions of years.
This is pretty exciting since life as we know it needs water to exist and flourish. However, there's no signature of liquid on Mars today. It's thought that volcanic activity in the vicinity of the polar caps could have melted some of the ice, resulting in liquid water for a brief time before it either froze or evaporated. It has been theorized that if Mars did at one time have large bodies of water, a weakness in a natural dam that confined a lake or sea could have resulted in catastrophic flooding, scouring large portions of the Martian landscape. Additionally, the presence of groundwater has been invoked to explain some erosional features of the Martian surface.