Water. Notice the threads are standard hose bib threads (forget what they're called, it's not pipe thread, just similar).
It uses a key to operate it, helps prevent average jerks from just turning it on. (These keys are widely available for about $5)
Edit: the little cap is for freeze protection. It's part of a mechanism to vent water from the last foot of the pipe and bib, so there's no water in it to freeze when the valve is closed.