You don't need to add water to produce the amine, but it's the simplest way of destroying any remaining hydride reducing agent (to give aluminium hydroxide, lithium hydroxide and hydrogen). Presuming you're doing the reaction in ether, the LiOH will all go to the aqueous layer, whereas Al(OH)3 is pretty much insoluble in any solvent you're likely to use in organic synthesis, so it's easy to extract the amine from the aqeuous solvent.

The "chemguide" page is a bit confusing. The reaction they write out isn't a great description of what's happening to the oxygen in the amide (it's probably going to be incorporated into Al(OH)3) but the other two "[H]"s just go to making the carbonyl oxygen into water.