From my understanding water shouldn't really damage electronics, but it does. what about water actually causes damage, and why is water with impurities such as salt make it so much worse?
There is nothing inherent about water that will damage electronics. There have even been experiments where electronics have been operating while immersed in pure water.
The impurities on the other hand can both conduct electricity and corrode the materials the electronics are made from. The former will cause unintended shorts, and the latter will destroy the electronics directly.
You state 'From my understanding water shouldn't really damage electronics'. I think that's just plain wrong, for several reasons. Several things.
Water is a conductor, though a poor one (see here). At 182kΩm (or 5.5 micro-siemens/m see here and convert to SI units), across a short distance (e.g. 1mm) and with long tracks that could lead to a non-negligible conductance, which is enough to affect a circuit's operation. This won't itself permanently damage the electronics (i.e. the circuit drying will fix it) but if the circuit is operated when wet, excess current may flow causing permanent damage, especially with high voltages present.
Whilst water is a poor conductor, gunk on the board may dissolve in water, decreasing its resistance further, possibly quite dramatically, increasing the effects in (1). Impurities already in the water may do the same thing.
When current flows through water, positive ions will flow in the direction of the current flow. This will cause PCB tracks etc. to be gradually electrolytically dissolved. This may cause permanent damage if operated when wet.
Various materials within the electronics may dissolve in or be damaged by the water, for instance paper within paper capacitors, cardboard speaker cones, etc. This may cause permanent damage if wet (whether or not operated).
Water leaking into air-based capacitors is likely to change their capacitance, and the additional parasitic capacitance of water surrounding the tracks is likely to change circuit performance. This will only affect the operation of the circuit when wet, and is unlikely to cause permanent damage unless it causes excess current to flow.
A small amount (1 in 10^7) of water molecules (in pure water) break into H+ and OH-. These can conduct electricity and hence mess up your circuit.
Impurities, specifically ions (charged particles) improve conduction (significantly) and hence increase the damage.