They were used for many years in jet engines to improve takeoff performance. My personal experience goes back to when I was flying the 747-200 with the Pratt and Whitney engines. We carried 7000 lbs of distilled water for a maximum gross weight takeoff. After takeoff, we would dump the remaining water because the weight of the water would reduce performance and there was no way to prevent it from freezing.
I pulled the heads on my 396 after running the water injection system for 10 years and the cylinders were beautifully clean, mind you I also run synthetic oil and that also helps to keep an engine cleaner.
I think the biggest reason for this systems lack of popularity, is the fact that if you run out of water in a high load situation, the engine could be destroyed by detonation. The car manufacturers have to think in terms of the fact that there are people who still don't think you have to check the oil until the red light illuminates.
Bob