According to the Midrash, when G‑d said “Let there be a firmament” and divided the upper waters from the lower waters, the lower waters wept and said: “We want to be in the presence of our King!” They were not satisfied until G‑d promised that they would be used for the water libation on Sukkot.

The water offering, then, expresses how the waters descended for the sake of an ascent, ultimately reaching a higher level. In other words, the water libation cancels the separation between the the upper and lower waters, and more generally, the separation between “above” and “below,” spirituality and physicality. This separation is canceled by elevating and spiritualizing the lowly physical world until it ascends to a higher level than before its descent.

From this comes the special rejoicing of Simchat Beit Hasho’eivah. When a Jew ponders the significance of the water libation, that the creation of “lower” entities is for the sake of a higher elevation, he is better able to serve G‑d with true joy and to overcome every obstacle and challenge.

(Likkutei Sichot, vol. 2, p. 420)