Water can do two main things;
1) It can rinse off the protective layer of fuel and oil from inside the fuel system and or the combustion chamber.Once the water melts ferrous metal and corrosion begins(rust)begins.Rust can jam moving parts and clog oil passage ways.Water will corrode the fuel pump,fuel filter,fuel lines and the injectors.
2) Water can enter the oil resovior as well and dilute the protective qualities of the oil.This will be akin to running the engine without oil if it were to run in such a condition.
You can remove the water by making it mix with the petrol.Using a compound that is miscible with both.One example is acetone.Acetone and water will mix.If there was some water in the tank,the engine will then typically run alittle rough while it burns water contaminated fuel.There are commercial products available,most of them listed acetone as their main ingredient.
The reason for using only a small amount of acetone(i would suggest a max of 0.5% of your tanks capacity.
If there is alot of water in the tank,it is better to take it out alittle at a time.To make sure the engine can run reasonably well on the watery fuel.500ml of acetone in a tank of gasoline will carry out no more than around 200ml or so of water,so the engine will be running 99.8% gasoline.
Acetone in strong concentrations(more than afew percent) can harm some plastics and rubber which may be part of the fuel system in your vehicle.Seals,O riings,pipe linings and so on.In practice,you would need a fairly high % of acetone to do any real harm.But playing safe and having an upper limit of 0.5% will not cause harm.Acetone has much lower energy energy density than regular petrol (though has a higher octane)and as much will make the engine run slightly leaner.
Finally,if you filled your tank to the brim and started the car.The engine would simply stop when it comes to injecting the water as fuel.Thank you.