The age old art of car sabotage is almost as old as cars themselves.  This particular form of sabotage is quite cruel and while it is considered a "prank", it is really meant to put a vehicle out of action for a good amount of time.

The thoery is that sugar dissolved into gasoline will make it past the fuel filter and into the combustion chamber.  The heat from the burning gasoline is supposed to carmelize the sugar, making a very sticky film inside the cylinders bore where it hardens because of the cooling effect of the engines coolant.  As this film builds up one or both of two engine destroying things happens: the piston rings dig into the film and snap due to the extra resistance, or two the engine seizes, freezing the pistons in place.  Both will require a complete overhaul of the engine, removing the vehicle from action. 

In times of war, this tactic was used by resistance fighters of many nations duing many conflicts.  The idea was that a vehicle needing a rebuild could not be used in combat or to opress the locals, and to overtax the enemies ability to repair vital fighting vehicles.  As a college stunt it is particularly cruel and is probably done without knowing the likely outcomes.

In practice, modern engines can be quite resistant to sugar.  Fuel filters are designed to keep contaminants out and extra oil ports inside the engine can reduce the buildup of carmelized sugar, but the overall effect cannot be totally prevented and the engine will eventually fail.