(Question 1): Oxygen is the key for generating energy in cellular respiration. The cellular respiration is a complex biological process that breaks down sugars, fat and proteins and transforms these materials into energy for the functioning of the organism. Oxygen is needed at the end of this process, when electrons liberated in the respiration are transported through the inner membranes of the cells, and the oxygen "attracts" these electrons (like bees to honey) and makes possible the production of great quantities of chemical energy in the said membranes.
(Question 2): Earth's natural bodies of water have a low oxygen concentration--much lower than the level of oxygen in air at the earth's surface. Smaller organisms can obtain sufficient oxygen through the skin (e.g. flatworms), but larger organisms require special structures to collect enough oxygen to sustain life. This oxygen comes from molecules of oxygen gas dissolved in the water. The oxygen atom present in the water molecule is not suitable for respiration.
