From what I can figure, it's the usual perspective trickery (flat water track, vertical tower, perspective makes it look like they line up), and then there's a nozzle pouring out water from the tower top.
Note that the water doesn't appear to flow in front of the wooden knob at the ledge it's supposedly falling off.
EDIT: Looking again at the HD version it seems I'm mistaken. ars' comment appears to have it correct, though.
Looking at the sides of the channel you can see that they get lower towards the "top". I can see how the channel is flat on the floor and that the supporting vertical struts are simply cut to the correct height for the camera's perspective. I'm at a complete loss as to how the water drops onto the wheel though.
The shadows the tower seem to be casting on the track are pretty convincing, but the reflection of the tower on the floor might indicate that you're right.
Note that the water doesn't appear to flow in front of the wooden knob at the ledge it's supposedly falling off.
EDIT: Looking again at the HD version it seems I'm mistaken. ars' comment appears to have it correct, though.