The term 'liquid diet' can often refer to a drinking session. However this phase can also mean, the manner of which a body is desposed off - implying that a persons body was dumped in a watered area, such as a river or lake.
Jim Bob: Well that asshole next door neighbour won't be giving me anymore drama!
Cleetus: Why is that?
Jim Bob: I took the son of a bitch out with my 303!
Cleetus: What did you do with the body? Did you bury him?
Jim Bob: Let's just say he's on a liquid diet.
Cleetus: He's in the lake then?
Jim Bob: Yep.