Did you know that hydrogen is the friendliest molecule - meaning that it is most likely seeking partners to attach to? Similarly, the suspended particles in oil actively look for particles to join forces, so they pair with the water.
This particulate contamination is the catalyst guilty of continuing the degradation of the oil and the increase of emulsified water. The more water there is, the more oxidation that occurrs. This also increases various acids that form as the molecules break down. These acids attack seals, hoses, pumps and metal.