It's a VERY VERY stupid idea!
This is not the first time someone has come up with it. There's absolutely nothing creative about it because the internet is full of people who did this before him. What's more, I'll quote from Wikipedia here,
"The claims for these devices have been found to be incorrect and some were found to be tied to investment frauds."
I'll explain you the science.
The energy from battery which is used to break H2O molecules will be equal to the energy released inside the engine.
H2O --> H2 + 1/2 (Electrolysis)
H2 + 1/2 --> H2O (Reaction in Engine)
The energy added in first reaction is equal to the energy released in the second reaction because both have equal bond energies.
So, essentially, the engine is run with battery. The water is just sort of a carrier for the energy. Petrol and diesel, no matter how expensive, are cheaper than a new battery every few days -_- What's more, because engines are low in efficiency, with each cycle, the recharge of battery will be lower.
The claim that you can make electricity is a total lie. An engine's efficiency is what, 40%? So if you put in say 100 Joules of energy from battery, your engine will only produce 40... Considering that those 100 Joules ARE electricity (Battery), it is a fine way to waste electricity.
http://en.wikipedia.org/wiki/Water_as_fuel
I don't doubt his demonstration. If some quasi-intelligent folks saw it, it probably works. The problem is that you can't replace petrol or diesel with water simply because the cost of battery will be too high. Nobody has asked Agha Waqar how many times he changes or charges his battery.
This just goes on to show the lack of knowledge, not just in our engineering students, but also of the big scientists that are supporting this.