Data's body is fully functional like a normal human body. It's assumed that he can pass food and liquid normally.
I've always assumed that they are compressed and stored inside him, to be emptied at a later time. He may have some sort of digestive system that doesn't rely on the production of energy, for example absorbing fats to use as lubrication in his joints. -Wolf of Thor 23:17, June 4, 2011 (UTC)
Essentially yes, his body is capable of metabolizing some foods for energy, but he does not strictly need to eat in order to function. This is also true for breathing.
Data does make reference to his having "bio-functions"; however, these are never explained in detail. He does tell Q, in the Star Trek: The Next Generation episode "Deja Q", that he ingests a lubricant that is "good for me" and that lubricates his bio-functions. What Data's bio-functions are, and why they need to be lubricated, is never satisfactorily explained. He probably has no use for regular food and drink other than to assess its taste, as shown in the Star Trek: The Next Generation episode "Hero Worship", and probably has an orifice somewhere on his body through which these can be "egested" after consumption. ProfessorTrek 20:04, July 16, 2011 (UTC)