It's for propulsion. Since water is non-compressible and air is, the high air pressure inside the bottle will force the water out with more force than air would force air out with. Which hopefully propels the rocket skywards.
HSciO 2014 — Astro, Forensics, Mission, TPS
"A common way to compute density is, of course, to take the ratio of an object's mass to its volume. But other types of densities exist, such as the resistance of somebody's brain to the imparting of common sense..." ~Neil deGrasse Tyson