why did padraig harrington drop the ball?

He could have re played the shot, or kept the point of entry between himself and the flag and gone back as far as he wanted before dropping. That is the option he chose. If the hazard had red stakes instead of yellow, it would have been a lateral hazard and given him the option of dropping within 2 club lengths from the point of entry no nearer the hole. Unfortunately for the tour pros, they don't get too many red stakes for hazards fronting the green. Just like at the Masters, where a ball will land on the green and roll back in and they always have to drop on the far side.

He had the choice of dropping it in the place from where he had just hit, but the chances are he would have hit a similar shot; since the green did not hold well from there. His other choice was to go to the other side of the hazard (keeping the spot where his ball entered the hazard between himself and the hole) and hit a shot that he could place and spin.

He could have dropped in the high rough, where he hit the shot that went into the water. But then, he'd run the risk of hitting another one in the water.

For a regular water hazard (yellow stakes), your other option is to drop 'behind' the hazard, as far back as you want.

He went to a distance where he thought he could hit a good wedge shot to the green.