At this link: http://www.investopedia.com/articles/trading/06/daytradingretail.asp they mention:
Liquidity allows you to enter and exit a stock at a good price (i.e. tight spreads and low slippage)
I know the definitions of liquidity (how much volume is traded),spread (low difference between bid and ask) and low slippage(trades get executed at the price at which you order (for market order). But I am not able to see for myself how more volume means low spread and tight slippage. More volume just means more people are interested in the stock...i.e supply and demand are matched well.