The Basics
Water is a simple molecule made up of two atoms of hydrogen and one atom of oxygen, joined together by covalent bonds; that is, the three atoms freely share electrons between them. The particular shape and structure of the molecule give it the ability to easily attract electrons, thus forming negative ions. Water molecules also have a small magnetic charge, much like bar magnets, that allows them to attract each other.
Small to Large Scales
These molecular characteristics of water give rise to a number of large-scale effects. First, its electrical properties make it an excellent solvent. A wide range of materials dissolve in water, allowing them to be carried to many places and to interact freely with each other to form compounds. These chemical interactions are particularly important within living cells.
Additionally, because water molecules attract each other as magnets do, water has a very high surface tension. This means that water, and substances dissolved in it, can be carried to great heights by capillary action. This property is critical to the circulation of nutrients within plants.
Thermal Properties
The magnetic attraction between water molecules also allows for energy to be stored in the bonds between the molecules. Therefore, water has an enormous capacity to store heat and to transfer it from place to place. This gives water the ability to moderate temperature over large areas of the Earth's surface, providing relatively stable environments for plants and animals.
Additionally, water is the only substance found naturally on Earth in all three states of matter -- solid, liquid and gas -- and it readily transitions between these states. Each phase change involves a transfer of energy as heat. These heat transfers have a great influence on the weather.
Expanding and Contracting
Finally, water has the very unusual property that when it freezes, it expands. Most substances condense as they solidify, but ice has a crystal structure that gives it low density, as well as immense strength. Since the temperature in many places on Earth regularly rises and falls through the freezing point, water can therefore flow into holes and cracks and then freeze, prying rocks apart. This makes water a major force in erosion, helping to recirculate materials from the ground and to create new habitats for lifeforms.