The explanation has to do with the polarity of the molecules that make up the liquid. Water is polar. That means that each molecule is like a little magnet with a plus (+) pole and a minus (-) pole. These plus and minuses in water molecules make the molecules attract and repel each other in special ways. (It's the reason water has so many of it's amazing properties.) Other liquids, like oil for instance, are not polar. They have no plus or minus ends. So if you mix a non-polar (oil) liquid with a polar (water) liquid they don't mix. This is because the water molecules all want to stay together with their plus/minus friends, and the oil molecules want to stay with their non-polar friends.