Yes, that's a real computer and a monitor submerged in a fish tank, with the power on. I found this while I was sorting through the leftover pictures I took from SC07. It has not been photoshopped. Here's a high res version if you'd like a closer look.
What's the trick? That's not water. It's a "non-conductive, non-flammable, non-toxic and environmentally friendly" liquid, used by the Angstrom LiquiBlade system. According to the company, their high-density blade servers "eliminate the need for data center air-conditioning, saving nearly 25% of a data center's electricity budget. Angstrom LiquiBlades are design to cool the latest AMD Opteron™ processors using a non-conductive fluid instead of water, thus eliminating the risk of data center disruption due to spillage."
For more pictures from SC07 (all 566 of them!) see my Flickr SC07 set.