Because she is made out of black snow.

I always took it as a metaphor for holy water. According to straightdope: The book provides a few hints: (1) When Dorothy first arrives in Oz, her house falls on and kills the Wicked Witch of the East. After Dorothy has some conversation with the Munchkins and the good Witch of the North, they noticed that "the feet of the dead Witch had disappeared entirely and nothing was left but the silver shoes." The Witch of the North explains that "She was so old that she dried up quickly in the sun." We note the reference to being "dried up." (As an aside, the silver shoes in the book became ruby slippers in the movie. Margaret Hamilton, who played both Wicked Witches, was a fan of the Baum books and asked the producer Mervyn Le Roy why the shoes had been changed to red. She reported that Le Roy said that in Technicolor red stood out better against the Yellow Brick Road than did silver.) (2) When the Wicked Witch of the West has captured Dorothy and her friends, she enslaves Dorothy for a time, so the reader has a chance to observe the witch's behavior. (The movie alters this scenario.) The Witch lusts after the silver shoes but "was too much afraid of the dark to dare go in Dorothy's room at night to take the shoes, and her dread of water was greater than her fear of the dark, so she never came near when Dorothy was bathing. Indeed, the old Witch never touched water, nor ever let water touch her in any way." This doesn't tell us why water is so potent against the Witch, but it set the stage, and lets us know the Witch is aware of water's power over her. We also note that the Wicked Witch is afraid of the dark, an amusing reversal of expectations. (3) "Once the Witch struck Toto a blow with her umbrella and the brave little dog flew at her and bit her leg, in return. The Witch did not bleed where she was bitten, for she was so wicked that the blood in her had dried up many years before." First, note that the WWW carries an umbrella, instead of the more traditional broom. This ties in neatly with her fear of water. (The movie, sadly, reverts to the traditional image of a broom.) Second, note that the Wicked Witch of the West was, like her sister the Witch of the East, "dried up." (4) After Dorothy throws the bucket of water on her: . . . the Witch began to shrink and fall away. "See what you have done!" she screamed. "In a minute I shall melt away." "I am very sorry, indeed," said Dorothy, who was truly frightened to see the Witch actually melting away like brown sugar before her eyes. "Didn't you know water would be the end of me?" asked the Witch, in a wailing, despairing voice. "Of course not," answered Dorothy; "how should I?" How should she, indeed? The obvious response, it seems to me, is that the Witch was was so "dried up" that the contact with water disintegrated or dissolved her, much as a dried up parchment would crumble to ash if hit with a stream of water. Going one step further, Dr. Douglas A. Rossman, writing "On the Liquidation of Witches" in the Baum Bugle, Spring 1969, suggests that the melting of the Wicked Witch is a chemical process. Normally, the molecules of a substance (or Witch) stick to each other, a phenomenon called adhesion. However, adhesion may be broken down by water or by some other powerful force (such as a house falling from the sky). The Witch has no blood or other bodily fluid; little is holding her molecules together. The water breaks down the weak adhesion of her body so that she melts away. Son of Dex says this is similar to the way sugar dissolves in water. Similarly, the impact of Dorothy's house landing on the Wicked Witch of the East breaks down the adhesion of her molecules, so she crumbles to dust. On a more symbolic level, there's a long tradition of water being antithetical to witches. A commonly prescribed trial for an accused witch was the ordeal by water: the suspect was tied up and tossed into a river. If she floated, she was guilty, and would be burned at the stake (hence, the water-and-fire making a neat little symbolism). If she sank and drowned, shucks, guess she wasn't a witch after all. Water is associated with baptism, and thus the water of the river rejects the witch as satanic. This type of trial was carried out as late as the 1690s. Robert Burns, writing a note to his poem "Tam O'Shanter" in 1790 says: "It is a well known fact that witches, or any evil spirits, have no power to follow a poor wight any farther than the middle of the next running stream." So the association of water as hostile to witches is a long-standing tradition that Baum possibly drew from. Taking a different tack, Celia Anderson, in "The Comedians of Oz" (Studies in American Humor, Winter 1986-87), notes gleefully that the Wicked Witch "is justly destroyed by that emblem of household drudgery, a bucketful of water." This is more amusing since, in the book, the Witch enslaves Dorothy and forces her to perform menial household chores. Henry Littlefield, in "The Wizard of Oz: Parable on Populism" (American Quarterly, Spring 1964), posits that the Witch symbolizes malign Nature. (Cecil cited this article in his column about Oz symbolism.) She "uses natural forces to achieve her ends," including wolves, crows, and bees, all of which tormented American settlers of the late 1800s. Water represents the most precious commodity to the drought-ridden farmers on the great plains. Thus, water brings an end to hostile or malign nature. Baum himself lived in Aberdeen, South Dakota, from 1888 to 1893, and so was well aware of the Great Plains symbolism. Tying this all together, we can say that water represents life, while witches are the apotheosis of death and decay. Light chases away darkness, good triumphs over evil (eventually, one hopes), and water melts witches. QED. Please, any wiccans reading this, we DON'T need any mail about how wiccans are maligned or stereotyped by Baum's story. Notwithstanding the movie, Baum's Wicked Witch is quite different from the fairy-tale wicked witch, although it draws heavily on that tradition. Baum's Wicked Witch of the West is petty, afraid of the dark, selfish, and mean--a spoiled child, in many ways, and very much Baum's own creation. We're also aware that wiccans aren't really melted by water, thanks very much. If you enjoyed the Oz book(s) and movie, you might also like Wicked: The Life and Times of the Wicked Witch of the West by Gregory Maguire, a "biography" of the Wicked Witch of the West from childhood to Dorothy. REFERENCES: The Annotated Wizard of Oz by L. Frank Baum, edited and with notes by Michael Patrick Hearn, W.W. Norton Company, New York, 2000.

Well, it's a fictional story. Anything could happen...