Iodine-131 half-life and reality Iodine is a chemical element with symbol I and atomic number 53.
There is currently a lot of discussions regarding radioactivity in Japan, and iodine-131.
Iodine-131 has a half-life of 8 days.
Does it mean that people drinking radioactive water (with iodine-131) will lose half of it within 8 days? 
And thus the health risk would be lower and lower over time?
 A: The Iodine-131 undergoes beta decay.  This is what makes it radioactive.  The faster it decays the more radiation it gives off per unit time.  Yes the material disappears faster than something with a longer half-life, but its speed of decay means that it is hotter.  
A: Iodine-131 decays with a half-life of 8.02 days into stable xenon-131 which is not considered carcinogenic.  Xenon certainly does not belong in your body, but the amount produced would be chemically insignificant.  Iodine has a biological half-life of 100 days in the body so any iodine-131 will probably decay before being excreted.  So the answer is YES to both questions, because the radiation is much more dangerous than the presence of xenon and this risk is incurred at the time of decay.
EDIT: The above answer assumes iodine-131 has been consumed and some time has passed, and it is incorrect unless there is some way of removing the radioactive iodine (KI therapy?).  The implication is that such treatment should be started as soon as possible, but it may not be worth the cost if months have already passed.  Without this possibility, the risk is incurred at the time of ingestion and the answer to the question of health risk is NO.  The above answer is also incorrect if we allow for other possibilities (e.g. a cure for cancer).  If as Henry suggests in the comments we have a glass of water contaminated with iodine-131, and we keep it stored in the fridge for 90 days, then more than 99.9% of the isotope will have decayed to stable and harmless xenon.  But I would drink it only if there was no doubt that it was free of other radioactive or poisonous chemicals (such as caesium-137).
A: I131 is a gamma and beta emitting isotope. As such, the beta emission is the destructive component. Beta emission is an electron ejected from the nucleus and is ionizing. This aspect makes beta electrons very destructive to thyroid tissue which concentrates iodine ~200 times more than any tissue in order to make thyroxine, an endocrine hormone which regulates the rate of metabolic processes. The important consideration is absorbed dose. This is the total dose absorbed while the I131 is present. So, the health risk is not 1/2 as much in one half life because the dose is internal and 1st half has already been absorbed.
A: Beta rays, a product of I131 decay,have a very short range. If concentrated in the thyroid, it will for all practical puirposes, not be biologically eliminated before it decays. This will ionize a lot of the surrounding tissue. 
On the other hand, gamma rays have a low absorbtion cross-section in the body and so do very little damage. Finally, Xenon is inert and should cause no damage at all.
Accordingly, the trick is for people to minimize the uptake of I131. There is some atmospheric in dust I131 near the reactor. There is contaminated ground and sea water. There could also be uptake in marine life and vegetation. 
It would seem to me, that except for people who cannot avoid being close to the plant and its environs, Iodide tablets are not called for. Avoidance would be much more practical. 
A: To this discussion should be added that apparently radioactive iodine-131 has what is known as an "effective half life" when in the human body....now physically, the 131 isotope has a half-life of 8.02 days and this remains precisely the same whether it is internal or external to the body---the helf-life of any radioactive isotope is a physical constant that depends strictly on the structure of the nucleus and its location within or without the human body is of no consequence whatsoever. Nonetheless, for some physiological reason, when radioactive iodine-131 is introduced into a human (usually as NaI) and a radiation meter, Geiger counter or some instrument that reads counts per minute (CPM) is placed close to the thyroid gland to which the iodine is most strongly gravitated and held, and the time for the count to drop to exactly half its original highest value is taken and averaged....the resulting figure is other than 8.02 days. This could result from migration of the "hot" iodine to other parts of the body or whatever but this new "half-life" as measured is referred to as the "effective half-life" in the body...but this term can mislead people into believing that once ingested, radioactive iodine's physical properties change---this is not so.
A: 
Does it mean that people drinking radioactive water (with iodine-131) will lose half of it within 8 days?

Yes, half-life means exatly that. I.e. that after half-life period quantity under consideration (radioactive material in this case) will be reduced to half of it's starting amount. Exact half-life for ${}^{131}I$ is $8~\text{days}~28~\text{minutes}$. After $\approx 2~\text{months}$ has passed there will be less than $1\%$ of radioactive iodine present in target sample.
BUT..., for that to happen, people need to stop drinking water with iodine-131 source after they have drunk some amount of it. If they constantly drinks radioactive water then the decayed part of ${}^{131}I$ in their body will be replenished again by new radioactive dosage from radioactive water. So if drinkable water has renewable iodine-131 source, then short half-life of radioactive material will not help at all.
In this case ${}^{131}I$ concentration in body can even increase with time if human drinks radioactive water more than body is able to get rid of it due to radioactive decay.

And thus the health risk would be lower and lower over time?

My opinion is that bad thing is a bad thing, no matter what. Because cumulative health effects is what matters in the end. I believe, you can get same cancer due to brief exposure to a very strong radiation source or due to being under weak radioactive field for a long time. In any case- it's not good for your health.
Now about Iodine-131 decay. Basically it decays with following reaction :
$$
{^{131}_{53}I\to {^{131}_{54}Xe}+\beta +{\bar {\nu }}_{e}+\gamma +606_{\beta}~\text{keV}+364_{\gamma}~\text{keV}}
$$
So your body in all course of radioactive decay gets a soup of beta,gamma and antineutrino radiation. Beta particles emitted are very energetic ones - typically they have energy about $0.606~\text{MeV}$. This accounts about $53\%$ of light speed in vacuum. Thus electrons are very powerful and after emission can penetrate a body tissue for $0.6 - 2 \,\text{mm}$ distance, in the path ionizing other body cell material. Human skin can be penetrated by gamma,x-rays photons with energy of $\geq 200~\text{keV}$. These in a reaction byproduct has about 364 $\text{keV}$, so seems that they can penetrate organ tissue too. Penetrating gamma rays can increase risk of cancer or do a damage to your DNA molecules, increasing a risk of birth defects in children. Antineutrino (as well as neutrino) particles interacts with matter very weakly, so after emission they should leave your body with no effect at all. Still I see no reason for increasing antineutrino density in your body. Summing-up all this,- better leave radioactive water alone.
EDIT
If no way for somebody getting a clean water,- then radioactive water should be stored in a basement or some place for $2-6 ~\text{months}$ without touching it - for minimizing radiation amount in it, and only after that it could be drinken in moderate levels.
