Water cooling has proven to be a highly efficient way of cooling CPU's, even way before PC gaming was a thing. This is because water is far more efficient at dispersing heat as opposed to air but, in the same breath, it's not necessary for all applications.
Water cooling systems used specifically for computers actually started way back in the mid-1960s. IBM had a set of mainframes called the System 360 which had built-in liquid cooling, but this had nothing to do with heat generated by processors that were not nearly as capable as what a basic CPU can do nowadays. A lot of this had to do with changes in technology, as modern computer components are a fraction of the size of what they were in the past, so they do not give off nearly the same amounts of heat.
So, in the late 80s and 90s, most conventional home computers never saw water cooling as they were not needed. However, towards the late 1990s, water cooling systems started to gain popularity yet again, but were mainly DIY setups and configurations used by enthusiasts.
At the beginning of the 2000s, the PC gamer market really took off, with hundreds of companies manufacturing PC mod components to increase the performance of home computers. In doing so, water cooling kits became available which proved to be far more durable and efficient than DIY setups.
Take a look at the video below by the YouTube channel, Tech Quickie, on The History Of Water Cooling...