Excuse me if I make this sound a little simplistic, I'm not sure how much you know about gfx programming or even what techniques you're using (I'd do it with HLSL myself).
The way I would approach this problem is to generate a texture which contains offsets of x/y coordinates in the r/g channels. Then the output colour of a pixel would be:
Texture inputImage
Texture distortionMap
colour(x,y) = inputImage(x + distortionMap(x, y).R, y + distortionMap(x, y).G)
(To tell the truth this isn't quite right, using the colours as offsets directly means you can only represent positive vectors, it's simple enough to subtract 0.5 so that you can represent negative vectors)
Now the only problem that remains is how to generate this distortion map, which is a different question altogether (any image would generate a distortion of some kind, obviously, working on a proper liquify effect is quite complex and I'll leave it to someone more qualified).