B'Tselem, "Water supplied in Gaza unfit for drinking; Israel prevents entry of materials needed to repair system." So much interesting info to digest, but a few highlights:

The water crisis in the Gaza Strip arose following over-pumping of the underground water of the Coast Aquifer. It is estimated that the amount of water annually pumped from the aquifer is roughly twice the amount of water that replenishes it. As a result of the over-pumping, which has been going on for several decades, salt water has penetrated the aquifer. In addition, the poor maintenance of the wastewater-treatment facilities in Gaza, which increased following the siege, and the damage done to the wastewater-treatment facility in Gaza City during Operation Cast Lead, led to further pollution of the underground water by wastewater, and to greater salinity. Another factor for the pollution is the waste-disposal sites in Gaza, which are not properly handled. Following Operation Cast Lead, these sites received enormous amounts of waste – more than 600,000 tons – including asbestos, medial waste, oils, and fuels.

The lack of construction materials and replacement parts has also led to greater loss of water from the supply network in Gaza. Prior to the siege, the loss had been 30 percent of the amount of water supplied to consumers, generally resulting from leaks in the pipes. In 2009, the loss reached 47 percent, according to figures of the Coastal Municipalities Water Utility.

Since treatment of water from pollutants such as nitrates and chlorides is very expensive, the cost of a cubic meter of treated water is a high as 50 shekels (some 13 US dollars in August 2010), 10 times higher than the price paid by households in Israel. Many Gazans cannot afford this luxury: the unemployment rate in Gaza reached 39 percent in 2009, and poverty in 2007 was 43 percent. In 2007, average family expenditures in Gaza stood at slightly more than 2,000 shekels a month.