What are water chillers?how do they work?

They cool the water - most of the ones that you usually see are for aquariums (saltwater tanks must be maintained around 74F in order to keep things alive). It's not a cooler for a device, but if you connect this inline with your loop it will drop your temps below ambient.

As for comparisons to a rad/fan setup, I think most of us are unsure. We've got a discussion going on in another thread since one of the guys here was looking into using his chiller.