It was acid. Just not a melt your face off type acid. It bleached their skin and discolored their hair and clothing. It likely also affected them mentally, but it's debatable if it made them crazy or just proved that they were. It is implied to be the same Ace chemical factory that the Joker is said to have fall in to make him as pale green as we know him.
The significance of the scene is to establish that Joker maybe somehow also actually cared about Harley instead of just toying with her. His face before jumping down seems to show some internal conflict, as of he himself disliked that he felt something for her, which pushed him to save her against his normal desire to kill people.
It's also to establish how Harley became like she did, her look. That she voluntarily became like that, out of a type of mad love for Mistah J. Unlike her recent comic reboot where he threw her into the acid against her will. The comics make him rapier than the movie.
Then again, as this is a flashback of an "unreliable narrator" like batshit crazy Harley, we don't know if that's an accurate flashback. For one, she wouldn't have been able to see what Joker does after she fell. Line of Sight issues.