The tap water supply in Phnom Penh has undergone some serious changes at the hands of a "water revolutionary" in the government, Ek Sonn Chan. So in Phnom Penh you can drink the tap water without problem, although it is highly chlorinated and you may not like the taste. Also there is some concern about the bottle water vendors. The U.S. Embassy web site says that "In 2008, Cambodia's Ministry of Industry, Mines and Energy reported that more than 100 bottled- water companies in Cambodia were being considered for closure for failing to meet minimum production quality standards. Only 24 of the 130 bottled-water companies are compliant with the ministry's Department of Industrial Standards." That page seems to be down on bottled water generally, so take it with a grain of salt.
Outside of Phnom Penh (and perhaps Siem Reap) you should assume that tap water is not potable. Khmer brand water in blue plastic bottles sell for 1000 riels or less (although prices are often marked up for tourists, to 50 cents or a dollar).
Iced coffee is ubiquitous in Cambodia. It is made Vietnamese style, freshly brewed and mixed with sweetened condensed milk. Walk past a local eatery any time of the day and you are bound to see at least a table of locals drinking them. One glass costs between 1500-2000riel. Iced tea made with lemon and sugar is also refreshing and ubiquitous.
Fresh coconut can be found everywhere, you could say it is ubiquitous, and is healthy and sanitary if drunk straight from the fruit.
In general, Khmers are not what could be described as casual drinkers: the main objective is to get hammered as quickly as possible. Know your limits if invited to join in!
The two most popular domestic Cambodian beers are Anchor — best ordered "an-CHOR" with a ch sound! — and Angkor. Kingfisher Beer, Beer Lao and Tiger are popular beers with foreigners. A plethora of other beers include ABC Stout, which is dark and not so bad, in addition to the standard Heineken and Carlsberg. Many of the cheaper beers are not especially nice, such as Crown or Leo, and only drunk by the locals.
Palm wine and rice wine are available in villages at 500-1000 riel for 1 litre bottle. However, some safety concerns have been raised with regard to sanitation, so the local wines may be best avoided. Bottled water is readily available at 500 riel for a cheap 1L bottle, or double that for a screw-cap. In Phnom Penh tap water is theoretically clean, though most travellers still buy bottles.
For a truly Khmer experience, hunt down a bottle of Golden Muscle Wine. Advertised on tuk-tuks everywhere, this pitch-black concoction made from deer antlers and assorted herbs packs a 35% punch and tastes vile when drunk straight, but can be made reasonably palatable (if not exactly tasty) by the addition of tonic water or cola. At US$2 for a 350 ml flask of the original and a budget-busting US$3 for the "X.O." version, it's also the cheapest legitimate tipple around.
Drugs, including cannabis, are illegal in Cambodia, and penalties can be very severe. That said, enforcement tends to be on the lax side and many guesthouses are permanently shrouded in purple haze. Low-grade cannabis (ganchaa) is fairly common in Cambodian cooking (for the flavor), but the days when you could just walk up to the Central Market and buy a kilo are over.
Both Phnom Penh and Siem Reap are full of Happy Herb pizzerias, but the police crack down occasionally, so even if you ask for "extra happy" and try out your secret handshake, you may only end up with lawn clippings. Alternatively, if they do deliver, be warned that effect of eating Happy Pizza comes on only slowly and you may end off biting more than you can chew, so proceed with caution.
Heroin is very high grade in SE Asia and foreigners requesting cocaine are sometimes provided with it instead, this regularly leads to deaths.