Pistons can be classified in several ways but for the purposes of simplicity we will consider only the difference between oil cooled and water cooled pistons as follows.

It is a well known fact that the heat absorbing and hence the cooling capacity of water is much greater vis-à-vis that of lubricating oil hence higher flow rates need to be maintained in oil is used to cool the piston. Apart from that the use of oil also increases chances of carbonization of the oil.

The main drawback of the water cooling system is that in case the water finds its way to the crankcase, it will get contaminated and hence cause problems, while oil if leaked will not have that much of an ill effect since there is already oil in the crankcase sump. Moreover the use of water also increases chances of corrosion as we know that unless the water used is properly treated, it could attack the surfaces it come in contact with.