Toilet is used by the prisoners to lower their bladder and bowels needs. It is currently the only object that lowers those two needs. When damaged enough by a prisoner, toilet will flood the area. The water will go away once toilet has been fixed by a workman. Prisoners will always start digging holes in the toilets in their cells.
Toilet requires direct water connection.
Prisoners, if they gain the correct tools, will attempt to dig a Tunnel from their cell to outside of the prison, starting in their Toilet. As of Alpha 34, if you suspect that someone is digging a tunnel, you can choose to manually search specifically their toilet. This was added so that it's no longer necessary to remove the toilet and re-build it. It's still possible, but not guaranteed, to find the tunnel on a blanket search of the cell or cell block.