When a barrel of 'fluid' is pumped to the surface it isn't all oil. Some is water. The oil is held in permeable rock, the pressure is increased by injecting high pressure water under the oil layer, forcing it up.
Since the oil is more viscous than water, some of the water slips past the oil and end up being pumped out. When the water does get past the oil, the remaining oil becomes stranded... and pretty much imposable to get out.
A high water cut indicates the death of a heavily pushed oil field.