No, they fall into the water. If you tried to pull them through the water ( called a water filter, BTW) it would quickly atomize all the water, not to mention probably filling the vac tank with water and foam. A hookah uses far lower air volume and speed.
The space in the spark trap becomes low pressure zone in the path to the vacuum motor. As the spark/grindings/dust enter the low pressure tank, they slow down ( larger space = lower pressure - Bernoulli's principle), and the loss of velocity allows gravity to cause them to fall. The baffle is there to direct the particles downward, avoiding the possibility of them jumping from the in to the out hose before they loose velocity. This (in part) is the basic principle that a cyclone dust collector works on. The trap does not need any water if the particles are only steel dust and sparks, but if you also grind wood the dust is flammable, so the addition of a cooling agent - water - will quench the sparks that get sucked into the vac line. Without a trap, the sparks can easily carry down 6-8 feet of vac hose and catch the vac drum and filter on fire.....ask just about anyone who has used a direct vac hose to the grinder. The cheap HF tank I showed has made the worry of sparks not a concern for me.
I have two hoses connected to my vac. One goes to the spark trap, and then to the grinder. The other goes directly to the grinder. There are two 4"X2 dust ports under the front of the grinder. The front one is directly under the belt ( where the spark spray goes). It is the one to the spark trap. The second one is the direct vac hose port. I have a 6"X3" plate of steel with a welding magnet on it that serves as a cover for the port I am not using. The magnet also makes it an extra catcher for stray metal dust. I have about six welding magnets sitting about on the grinder table to catch the stray metal dust/shavings. After a while they become black fuzzy balls, and I wipe the metal filings off with a gloved hand.
With the cover on the back port, the sparks and grindings go to the metal/spark trap. With the front port covered, I grind wood and the wood dust goes directly to the large shop vac tank. I am in the process of building a better system, where the changeover from wood to metal grinding is done by the flip of a lever. It will only have one hose and one port. The diverter will be what determines the path of the sparks/dust. More on that later as it finalizes.
Stacy