Hi Chris
That loop in the tubing is called a loop-seal. It's purpose is to stop any exhaust fumes from passing down the tube and into your house, so yes it is necessary. Make sure it is not kinked anywhere. You may have to take it off and clear the opening in the white PVC tubing.
Drains from exhaust piping as well as drains from your furnace and A/C do get plugged up occasionally and you have to clear them. It's a pain in the ass but that's life.
Whenever you see water on the floor where it shouldn't be in the furnace area, check for plugged tubing befrore you make that call to the HVAC tech.
John Allingham, Professional Engineer
Owner & Certified Home Inspector
Halton-Peel Home Inspection
(416) 254-5869
www.peelhomeinspection.com