The finer grit papers clog easily with sanding residue. By irrigating the area with water, often with a little soap in the mix, the sanding dust is flushed away, keeping the paper clean and lubricated, so the scratch pattern is consistent. It's near impossible to get a perfectly smooth finish right out of the gun. The final sanding levels off the miniscule peaks and valleys, for more consistent reflectivity once polished. Think about glass. "Smooth as glass" is the ultimate in shine, while frosted glass has a textured finish.
Bill