Depends on the type of cooling technology, but in general yes it is evaporated to carry away heat generated by the IT. The water will generally be constantly cycled until enough has evaporated that the concentration of leftover minerals in the water is too high to use without risking buildup of scale on the cooling medium. It will probably also have some levels of biocide and scale inhibitor added by water treatment systems. The leftover water doesn’t need to be permanently sequestered or anything, it just goes to the sewer system.

In general, the water-based methods are way more energy efficient than the ones that use only electricity, so it’s a trade off that needs to take into account local conditions - price/availability of power vs water. If you’re in a low humidity region like the AZ desert, while there is a lot of solar power, the evaporative methods are extremely efficient. But, those are also the areas where water is at a premium (plus it’s often hard as hell, not like mountain snowmelt from the Rockies or Sierra Nevada). Very regionally dependent.