Why is water-contaminated fuel bad, but water-injection is not?
Because of the quantity of water in the fuel, as opposed to a careful introduction of water into the combustion process.  Typical water contamination is bad in fuel tanks as water is denser than aviation fuels and settles at the bottom of the tanks.  Aviation fuels are also hydrophobic (non-polar) and so do not readily mix with water.  Therefore water will settle unmixed at the bottom of the tanks, in the fuel sumps or feeder hoppers and when ingested into the engine will fuel starve it and cause it to shut down.  Water in fuel lines can also freeze there during cold weather, causing fuel starvation as well.

Fuel samples should always be taken of the gas when it is both in storage as well as prior to flying the aircraft, especially after rainstorms or the aircraft has sat on the ground for long periods with low fuel in the tanks in a humid environment.  Fuel samples should also be taken approximately 30 minutes after refueling and the gas allowed to settle in the tanks.  A preflight sample of water contamination taken from the fuel tank sumps of a GA aircraft can be seen here.



Water injection, however carefully controls the amount of water going into the engine along with fuel at the point of combustion, allowing for continued engine operation.