First we need to understand what it is and how it works. Water methanol injection is a system that injects water or a combination of water and methanol. It uses a high  pressure pump atomize the mix and the sprays it into the turbo pipe or intake manifold. The first thing this dose is cool the temperature of the air going to the intake. Then when it enters the cylinder it turns from liquid droplets to vapor with the heat of combustion. This steam adds to combustion and helps the fuel burn more completely. It also steam cleans the inside of your cylinders.
When you add more horse power to a engine it increases the temperature and can cause pre detonation which, if uncontrolled, will result in physical damage to the engine. So this is what the water part dose. The methanol; Methanol has been used as a racing fuel for a long time, so this is where you pick up horse power. The methanol also helps cool the air in the combustion chamber.  In the end it is about cooling if you can keep the air and cylinders cool you can add more fuel and get more horse power.
You can add as much water methanol as your engine can handle, so as much cooling as you need. If you add to much for your engine it will cause quenching, this is when to much water is getting injected. It will cause what looks like steam coming out of the exhaust.  Mostly you will find water methanol on turbo or supper charged engines but it can be used on naturally aspirated engines. On naturally aspirated it is mostly for horse power. It can be used on a non modified engine, say you do a lot of heavy towing this can benefit just to help keep the engine cool.

You can use just water, you can buy pre mixed, you can mix it yourself or you can use blue in color with no additives windshield washer fluid rated at -20 degrees, this gives you 30% methanol and 70% water. If you buy pre mix it is 50/50. The more methanol the more horse power. The reason you never see more then 50/50 mix for sale is methanol is flammable, and when it burns you cant see it. Above 50/50 it becomes flammable.

I put the top of the line Snow Performance on my 01 Dodge cummins so I will tell you how I feel about it. I also have a video of it in use be sure to take a look at it.  I have a lot of mods and I was having a hard time getting it to work with out running high ETG's. I put a external waetegeate on and it made a big difference but it was not good enough. I use my truck for work and tow a lot, this is the main reason I wanted to do the up grades for towing and just make it a little fun to drive.

When or why do you need water methanol injection?

The in's and out's of water / methanol
injection

The one I bought has two parts one they call MPG and the other is tow. The MPG works off of boost and you can set any way you like. The tow works off of ETG's and you can set it to start at any temperature. If you tow in MPG it will drink water methanol, I tried I used about 1 gallon for 100 miles. If I use the tow mode it works much better. You just have to play with it to get to work for you. What is good is you can set it up any way you like. I put it to a test to see what would happen, I towed about 13,000 pounds up a mountain and held 75, about 10 miles and my ETG's stayed in check but I used one gallon of water methanol.
After I put the water methanol on I played with it till I got where I wanted it. What I saw with my truck is I could get a little better MPG but I had to use a lot of water methanol so I don't think there was any cost savings. As far as horse power "maybe"but I use it for work and towing and did not feel any different from water or water / methanol. My ETG's big improvement, so I came to the conclusion I would primarily use it for my ETG's. I did have second thoughts I could have bought a cheaper one. But then it would not have to two part so I guess I bought the right one. I use just water in the summer and I use the blue windshield washer fluid rated at -20 degrees. In the winter. Most places stop carrying the -20 in the summer and be sure not to use and thing with additives in it. 
Blog / info
Watch a video on how the snow performance water methanol
system works