Yes this does work but it is not a reliable system. First those little fish air stones are not reliable, they can not take the constant vibration from the flat four VW engine(a v8 might work better) the most I could EVER get was around 100 miles before the stone was in pieces in the bottom of the water container, and this was with it supported in said container to help keep it from vibrating. Second when you read up on this system it will tell you that you should add some denatured alcohol to the water as this will help keep it from freezing in cold climates and it will also give you an extra increase in octane. Now while these statements are true the life of the air stone will now drop to a little over 40 miles as the alcohol tends to destroy it. And last the extra HP and fuel economy is not as big as you might think. The car that I tried this on is a 1966 Ghia with a freeway flyer trans and a 1904cc (90.5x74)motor. In a quest for better gas mileage I installed a stock manifold and Pict34-3 carb and re-jetted it to run this engine. After playing around with different settings and distributors and the like I was able to get a true 34MPG at 65 miles per hour. I know that this is it's true mileage because at that time I was driving to and from work (74 highway miles one way) and kept track of my fuel consumption and mileage, I did this for 2 years. during this time I tried this exact water injection system with the results as listed above. During these trials the best that I could get in improved mileage was an extra mile per gallon so the problems of keeping the system working was just not justified by the results.
One last thing I think I should add here is just what water injection was designed for in the first place back in the 30's and 40's. The idea was that aircraft engines lost horsepower as the aircraft climbed in altitude and the air got thinner. To fix this it was decided to install turbo-superchargers on aircraft engines, but it was found that yes the turbo-supercharger increased the amount of air being compressed into the engine it was also heating that air and while it worked well at lower altitudes at higher altitudes and thinner air the charger was still just not enough. They then decided to add a mist of water injected into the air intake after the charger in an effort to cool the air charge and make the air denser and they found that at those altitudes with the denser air charge the horsepower increase was dramatic. It was at this time that the Germans also experimented with alcohol and ethanol to be injected with the water to increase the octane of the fuel which resulted in an additional increase in horsepower compared to just water. Olspeed
66 Ghia 76 std Beetle
It's not a car it's a VolksWagon