Water is known as the universal solvent because it has the ability to dissolve a wide variety of substances. This is due to its unique molecular structure, which allows it to form hydrogen bonds with other molecules. These hydrogen bonds break apart the solute particles and surround them, dispersing them evenly throughout the water. This property makes water an excellent solvent for many substances, including salts, sugars, and gases. Additionally, water's polarity also allows it to dissolve both polar and nonpolar substances, further contributing to its universal solvent properties.