The "water powered car" they're talking about isn't really running on water, it's running on electricity in a super-uneconomical way.
The car uses electrolysis to make "Browns Gas" aka HHO. It's like hydrogen-rich water, which can be utilized as a fuel in combustion engines. Unfortunately, the amount of energy used in the electrolysis stage of creating the fuel would be better put to use simply powering an electric motor.
It's actually a common scam, a google search turns up dozens of "kits" to convert your car to a "water hybrid". some of them charge hundreds of dollars for some galvanized nails and a mayonnaise jar.
I've been mulling over the idea of a compressed air moped ever since I heard about that air car... With a little improvisation it wouldn't be unrealistic to just convert a stock two stroke engine to a simple expansion motor unit similar to that of a small steam engine. Hook up a small compressed air tank and add some silicone oil for your "pre-mix".