John answered them, "I baptize in water, but among you stands one whom you don't know.
I baptize in water ...  Note that it was IN, not WITH, water that John baptized, indicating immersion as the action which constituted baptism. John repeated the fact already mentioned by his questioners that he was baptizing people, and then he told them why he was baptizing.  Why was it? The Messiah had already arrived but had not yet been publicly revealed. Hence, it was appropriate that the herald should be about the business of cleansing the nation through repentance and baptism, that being God's way of making ready a people prepared to receive the Messiah.  The concise answer of why John was baptizing is in the last clause of this verse, "In the midst of you standeth one whom ye know not."