As with a lot of supplements, there is the question of becoming dependent on it (your body may stop production of its own if you use it constantly for too long). This is why its important to cycle it if you do use it. 8 weeks on, 4 weeks off is a common cycle.
Creatine doesn't actually "hold water". Rather it facilitates the transport of water into muscle cells. When you work out, your muscle fibers incur micro-fiber tears in them. The faster influx of water into your muscle cells allow these micro-fiber tears to repair faster. Because of this, you don't stay sore as long, you have faster muscle mass & strength gains. Also the water servers as a volumizing agent... your muscles will have more water in them, so you'll look larger.
When you cycle off the creatine, you will lose the pure volumizing effect of creatine. However the faster rebuild of the muscle fibers that led to bigger and stronger muscles, that will not be lost... unless of course you become totally lethargic
