Humm ... want to eat at your house sometime Mish ... "Bong Water"! (Actually I had to go to the William Jefferson Clinton presidential memorial library website to find the definition of that term.)
But, basically you are right. Build a fire, use a vacuum to draw the smoke through a water filter ... you get liquid smoke. The flavor componets in the smoke are water-soluable, the bad stuff like tars and PAH's (carconogenic stuff) are not - they can be seperated from the water as easily as the tar and nicotine and such in my Science Fair experiement back in 11th grade.
So Hopz - the problem isn't that it is bad for you (probably safer than grilling a steak on the gill) but yes - it is a VERY concentrated flavor and should be used judiciously.
"It ain't what you don't know that gets you in trouble. It's what you know for sure that just ain't so." - Mark Twain