I believe it works to a point. It has to do with the magnetism.  I do not believe it to be supernatural. 
I have used it to fine shallow lines but not for a well. I have thought about doing it. 

Also there is not water everywhere in the Ogalala. We spend the money on test holes after a visit with the district hydrologist and consulting with drillers.

 http://water.usgs.gov/edu/dowsing.html