The supply of Toronto's water is unlimited, but the pumping capacity is not. The capacity is based on the max expected hourly demand which would not be exceeded on the vast majority of days. The few times of the year that demand can't be met, that extra capacity is provided by reservoirs which are scattered throughout the city. But even then, the volume of water that the reservoirs supply can usually be replenished during periods of lower demand.
This system works fine and dandy 99% of the time, however problems start to arise during periods of prolonged hot and dry weather. The demand is so high that even with pumps operating at full capacity around the clock, more water is taken from reservoirs than replenished over a 24 hour period. And during times like these when we are relying on reservoirs to supply that little bit of extra demand, you can see that major supply issues start occur.
The bottom line is that it's completely irrelevant that Lake Ontario supplies an unlimited amount of water. It's all meaningless when more water is being used than can be provided. If everyone ignored watering bans, you bet that we would run out of water in a matter of days.
People have got to be aware that the city will run out of water when not enough people cut back on use.