What is the Liquid that forms on the top of Yogurt?

That liquidy stuff is called whey. When the bacteria that forms yogurt grows sufficiently, the milk coagulates. The proteins squeeze together and form curds, pushing out the watery whey.
Whey may be watery, but it isn't water. Whey contains sugar, minerals, some protein, and lactose. Don't waste it. Mix it back in with the rest of the yogurt. You'll be a better (nutritionally, anyway) for it.
http://aboutyogurt.com/