why a pencil dipped in water appears bent at the interface
 

Due to refraction.

Refer to dinesh, if you are having.

due to refraction through water surface.

Suppose two rays originate from the end of the stick in water . As these rays get refracted into the air. they bend away from the normal . When these two refracted rays are produced backwards they seem to meet at a point higher than the end of the stick . this point gives the apparent position of the end of the stick .