Why are the three most simple alcohols completely miscible? I want to know why the three most simple alcohols (methanol, ethanol and propanol) are completely miscible in water?

I want to know what happens at molecular level. 

I think hydrogen bonding plays an important role.
This happens because the intermolecular forces between different low molecular weight alcohols are very similar; as you say, they are dominated by hydrogen bonding. You can consider mixing on a molecular level to involve exchange of molecules from the two phases at their interface; if the energy changes involved are very small, mixing will occur as it is entropically favoured (mixed phase is more disordered) and the average thermal energy is far higher than the barrier to diffusion.