Sorry if this seems like a stupid question, but no one here at work seems to know. is there a compressor avalible that will compress both air and water?
If you are talking about SMALL amounts of water there are types of compressors which can handle it better than others, (centrifugal or Screw type) but liquid entrainment is still considered a bad thing with these types. Vendor will need details on type, amount, etc. of liquid entrainment. Stay away from recip type.
With any significant amount of liquid you will be better off separating the air and water with a knockout drum, separator, and/or a coalescer, depending on conditions, before sending the air to a compressor.
TD2K,
Your last point is really important. Often, the sealing liquid will react badly with the entrained water and form an emulsion that can smoke the compressor. If you have a lot of liquid that you just can't separate, I like centrifuguls or eductors/ejectors better than screws or liquid rings because the later two are positive displacement and it doesn't take much liquid accumulation to do ugly things.