The enzymes that break down alcohol use up a lot of water in the process. Since passing out and sleeping for a long time is pretty much the usual procedure after getting drunk, you're not in a position to drink more water and as a result you wake up seriously dehydrated. As BW said, that's mostly the effects you feel in bad hangovers. Drinking enough water to prevent this does work - I've tested it myself many times.
I actually read up on that to find out exactly how it works and stumbled upon a fun semi related fact; if you drink antifreeze by accident, it can either be fatal or cause serious brain damage; what happens is the enzymes that break down alcohol try and break down antifreeze, and create oxalic acid as a byproduct - which tends to crystallize. These pieces can physically damage your brain.
The fun part is the treatment; drink alcohol. Lots and lots of it. With alcohol in your system the enzymes that would otherwise go after the antifreeze will go after alcohol instead, allowing time for the antifreeze to get filtered out of the body without being broken down into oxalic acid. I always liked the idea of alcohol as a cure.. though I still don't think I'm going to test it. One of those "don't do this at home" things I guess
