I've been thinking recently about the topic of hydrostatic shock, and I figured I'd go ahead and do a brain dump, with some observations and questions that I have.
High speed projectiles appear to have three distinct effects when hitting an object. We'll assume ballistic gelatin for now, as it's standardized and roughly replicates tissue.
Hydrostatic shock. This is a compression wave that travels through the medium--in other words, a sound wave. And with regards to comments above, water IS slightly compressible, otherwise compression waves would NOT travel through it.
Temporary cavitation. This is tissue that is displaced by the projectile, but springs back. Unlike the compression wave, which travels at the speed of sound in the medium, this is a displacement wave, and travels much slower, though it can readily exceed the speed of the projectile. This effect only exists in elastic mediums, like ballistic gelatin, which will spring back wherever the tensile strength of the material is not exceeded.
Permanent cavitation. This is the hole that remains after the medium comes to rest. This is cause by stressing the material to beyond its elastic limits, typically by direct contact of the projectile, but may also result from remote stretching exceeding the material strength, such as the "splash" of a high speed impact crater.
All of these are demonstrable, and measurable. A hydrophone will measure the hydrostatic shock in μPa, the temporary cavity can be seen in high speed photographs (and its size and speed estimated from them), and the permanent cavity volume is readily measured by filling with fluid, and its perimeter may be estimated if a transparent medium is used. That these phenomena exist is pretty much beyond question. The question is, how much impact does each have in relation to wounding? This is where the issue becomes very murky.