What's Happening?
The laser beam is "trapped" inside the water because of Total Internal Reflection. As the light tries to pass from the more-dense water to the less-dense air, it bends. (This is called refraction.) At a certain point the light bends so much that it is bounces off the surface of the water. (This is called reflection.) In the narrow column of water, the light wave continues bouncing off the boundaries of the stream of water but cannot pass through into the air.
The same principle applies with a piece of glass or plastic fiber optic cable. We have some lying around somewhere. I'd like to try using it in an art project, but with LED bulbs instead of lasers....