Water Heater Relief Valve

A safety feature of the hot water heater includes the pressure relief valve and discharge pipe. It operates like the radiator cap on your car. The purpose of this valve is to relieve excessive temperature or pressure builds up inside the tank if it approaches the limits of the tank's safe design range. This valve is located on top of the tank and often is threaded directly into the tank top itself. To test the valve, lift up on the handle slightly and hot water should discharge out of the overflow pipe.

WIKIPEDIA ENTRY FOR WATER HEATING.

Water Heater Picture 

 Water Heater Relief Valve Picture