Do we hear better under water?
Yes and no.
The detection of sound waves actually works better in water than in air because water transmits pressure waves more efficiently.
However, the difference in density means that human speech sounds are muffled or garbled underwater, making talking across a distance practically impossible. This is why scuba divers communicate by hand signals.
Underwater sound systems:
We evolved to process sound data on land, so we simply don’t hear as well at the bottom of a river — despite the ability of some divers to have ultrasonic hearing underwater. When you’re underwater, however, flooding in the outer ear prevents a lot of that necessary vibration and essentially nullifies your air conductivity hearing ability. We call this bone conductivity, the conduction of sound to the inner ear through the bones of the skull. This mode of hearing is 40 percent less effective than air conductivity, but it’s still the primary way we hear underwater [source: NOAA].
Meer info: http://electronics.howstuffworks.com/gadgets/audio-music/underwater-sound-systems4.htm
Can I make a DIY under water speaker?
Yes, you can, with the help of a… pressure cooker: