Yes, brake fluid absorbs water. When you apply the brake the fluid heats up, and because water has a very low boil point, it can create steam pockets. This is part of what makes brakes with old fluid feel mushy. Once you have opened a container of brake fluid, it begins to degrade. This is why fluids have a wet and dry boiling point. Dry is pure fluid that hasn't been ruined by air, wet has absorbed water and become "wet". The best fluids handle the absorbtion of water well, and continue to have high boiling points when "wet" because they are better able to hold the water in solution. (I'm sure a chemist will come in here and correct me)
Heat also brakes down fluid. In my roadrace bike, I can feel the brake fluid degrade in a weekend of racing from the extraordinary heat the front brakes generate when braking at 160MPH. Dunno the chemistry behind it though...
I change mine frequently. Not really a fan of the mighty vac, although I own the high zoot metal version.