The NPC Spectulus in the Liquid Black Quest has this to say:
Spectulus: I will put this under your footgear. Here you go. And this in your nose. There. And there will be no further problems for you down there. Except- ah, well you'll find out yourself soon enough, won't you?
So by the looks of it, Spectulus seems to give you some kind of 'underwater' equipment that allows you to walk and breathe easily underwater :)