In addition to the liquids that instantly come to mind, such as water, milk, fruit juices and coffee, sometimes eggs, honey, molasses and melted butter can also be considered liquids. I agree with many professional bakers who prefer using a milk product as a liquid in their cakes because it contributes additional moistness, flavor, color and even sweetness.
Besides moistening the flour and dissolving the sugar and salt in your batter, liquids moisten baking soda or baking powder to begin the evolution of carbon dioxide, needed to produce volume in the cake.