This is known as water training.
Training with water far before an eating competition is very common. The act of chugging a gallon of water quickly over a long period of time will indeed stretch your stomach. If the competitor does this regularly before a competition, it will help him/her fit more food in their stomach.
As a side note, this is not recommended by doctors as it is very dangerous. Drinking a large amount of water in a short period of time can dilute the electrolytes in your blood, which can lead to a loss of heart, muscle and brain function.
Quotes from competitors on water training...
"Lerman, 42, says he trains every day to stay in top shape. Like most
competitive eaters, he drinks massive amounts of water, more than a
gallon at a time, to stretch his stomach. Only rookies think that
"Champion eater Eric "Badlands" Booker, who has been training by
drinking 4-1/2 litres of water in three minutes, twice a day, for two
weeks.'It helps elasticate the stomach.'"