When the water is not rotating, surface tension creates a skin-like layer of water across the small hole in the center of the connector.
If the top bottle is full, the water can push out a bulge in this surface to form a bulbous drop, which then drips into the lower bottle. As water drops into the lower bottle, the pressure in the lower bottle builds until air bubbles are forced into the upper bottle. The pressure that the water exerts on the surface in the connector decreases as the water level in the upper bottle drops. When the water level and pressure drop low enough, the water surface can hold back the water and stop the flow completely.
If you spin the bottles around a few times, the water in the upper bottle starts rotating. As the water drains into the lower bottle, a vortex forms. The water is pulled down and forced toward the drain hole in the center by gravity. If we ignore the small friction forces, the angular momentum of the water stays the same as it moves inward. This means that the speed of the water around the center increases as it approaches the center of the bottle. (This is the same reason that the speed of rotating ice skaters increases when they pull in their arms.)
To make water move in a circle, forces called centripetal forces must act on the water. These “center-pulling” forces are created by a combination of air pressure, water pressure, and gravity.
You can tell where the centripetal forces are greater by looking at the slope of the water. Where the water is steeper, such as at the bottom of the vortex, the centripetal force on the water is greater. Water moving with higher speeds and in curves of smaller radius requires larger forces. The water at the bottom of the vortex is doing just this, and so the wall of the vortex is steepest at the bottom. (Think about race cars: Racetracks have steeper banks on high-speed, sharp corners to hold the cars in their circular paths around the track.)
The hole in the vortex allows air from the lower bottle to flow easily into the upper bottle. This enables the upper bottle to drain smoothly and completely.