Osmoregulation is the regulation of water and solute levels in the body.
If the blood becomes too dilute blood cells would absorb too much water (by osmosis) and could swell up and burst. If the blood becomes too concentrated the cells could lose water (by osmosis) and shrivel up.
In humans the main organs of osmoregulation are the kidneys.
If you drink too much liquid your kidneys respond by increasing the amount of urine which you produce, to remove the excess. The urine is also more dilute than normal.
If you lose too much water, for example through excessive sweating, the kidneys respond by producing a smaller amount of more concentrated urine to save water.
See
http://www.mhhe.com/biosci/esp/2001_gbio/folder_structure/an/m9/s1/index.htm
http://www.cartage.org.lb/en/themes/sciences/Zoology/AnimalPhysiology/Osmoregulation/Osmoregulation.htm
http://en.wikipedia.org/wiki/Osmoregulation