Dry foods are so nutrient-dense, that the volume of the amount of food that is calorically appropriate for their weight might not come close to filling up their tummies. If their meal is full of water, it definitely increases satiety – that sensation of fullness. They quit walking around the kitchen looking unsatisfied after their meals when their food is soaked.
If you’ve ever soaked your dog’s food, you’re aware of how much dry dog food expands when immersed in water. It’s a little horrifying, actually, to realize how much more space a certain amount of food will require in a dog’s stomach and gut once the dog’s digestive juices hydrate the individual kibbles. It nearly doubles in volume. The kibbles are like little sponges – some more than others. I’ve noticed when soaking food for various foster puppies that some kibble is more resistant to soaking than others.
Adding water can definitely increase the palatability of dry food for some dogs.
However, one shouldn’t moisten food and leave it sitting out at room temperature for very long – I would start being concerned about bacterial growth in moistened food that had been left out at room temperature for more than an hour.