yes, of course water will affect the touch screen of your phone. please keep it away from water. occasionally its better you wipe the touch screen with a dry and soft cloth too.
please note that the mobile phone is a delicate electronic device and contact with water may damage the phone partially or completely! this is applicable for the touch screen too. try to avoid direct contact with water in any case.
Yes, the screen has plasma underneath, and if water gets into it you will not be able to use the touch pad. Service must be needed but may not be covered under warranty.
