Liquefaction most often occurs in loose, granular soils, often with poor drainage. These soils most often occur in swampy/marshy areas or in areas of reclaimed land (land that used to be underwater but was filled in for development).
Because these loose soils have a tendency to compress when sheared, during an earthquake or any period of repeated loading and unloading of stress, the pore pressure increases which results in the loss of strength of the soil
Some large earthquakes can cause what are called sand boils, sometimes called sand blows or sand volcanoes. This is where the shaking causes sand and water to force its way to the surface causing a fountain of sand and water, sometimes several meters high.
The most dramatic effect of liquefaction occurs when large buildings are built in unstable areas. When the soil beneath these buildings liquefies, the buildings often do not collapse outright, but end up tilted or completely toppling over, leaving the building structurally intact.
The photo is from the 1964 Niigata, Japan earthquake. What you see is the tilting/toppling of buildings due to liquefaction. Note the buildings did not structurally collapse, they just fell over, like cutting down a tree.
Photo Credit: Earthquake Engineering Research Center, University of California, Berkeley