Answer and explanation
To collect a gas, a beaker is filled with water and then turned upside down in a bucket of water, this is done to make sure that there is no gas or air in the beaker, so that the correct amount of gas produced is recorded.
The water level goes down during an experiment because the gas produced replaces the water, the gas bubbles force some of the water out of the beaker.
The purpose of water is to fill the container so that the gas that will be collected is pure and not mixed with air, so water acts as a barrier, to prevent air into the beaker.