Water

Water is a fluid that can only be placed by the player when using a bucket (unless hacked in the player's inventory). On newly-generated maps, water is common at ocean level also known as sea level (elevation 62) in the form of lakes. It also appears in pools, springs underground and lakes above ground. It can also be found in Village Wells, Desert Wells and sometimes as Springs / Waterfalls from a cliffside.

Water cannot be found in The Nether and water from a bucket will evaporate as soon as it touches anything in there (cauldrons excepted). Water "blocks" obtained through inventory editing can still be placed in The Nether.

Water reduces light by 2 for every block, in addition to normal dispersion.

Spreading
In Classic, Water spreads horizontally and downwards by duplicating itself to empty squares. Water spreads faster than the speed of a walking player, and if left alone covers everything at or below the level the water started at if there is a direct connection. Water is semi-transparent and slows down the player if he or she is moving through it.

In Beta, if the Water is much deeper than the height of the currently submerged player (and all other Mobs, with the exception of the Squid), they start to drown after their 15-second air gauge is eliminated. Water cushions fall damage to a certain extent, in the same way that it dampens horizontal movement as well (up to 16 blocks for a 1 block deep water, and 32 blocks above water for a 2 block deep water). You still can die from it, however. It is advised that you allow at least two blocks of water for any unreasonable jump. Three blocks of water will not guarantee survival, what many people seem to believe. Four blocks of water will keep you 100% alive. However, if the water is "floating" Because of a sign and still has two blocks between the water block and the ground, it will keep you 100% alive, even if you jump from world height.

In Infdev, Alpha, or Beta mode, Water spreads across surfaces in a slightly more realistic way but cannot spread on top of another Water block. This allows the creation of waterfalls in these modes. The player can pick up Water blocks from sources such as an ocean or a lake by use of a Bucket. When placed again, the Water creates a spring which generates flowing or falling water. When a spring is destroyed, all flowing water created from it will slowly dry up. If there is a hole six blocks or fewer from the point of origin, the water will tend to flow in that direction. Source blocks and falling water that has landed on a solid block will always flow in at least one direction unless restricted. Water will travel a distance of 8 tiles with the counter resetting every time it lands on a lower level. If a block next to a water source block is destroyed, the water will immediately flow in that direction unless there was a block beneath the destroyed block.

Management
Water tends to be harder to deal with on non-creative modes.

Placing a block in the same space as water will replace the water. Entire lakes can be filled this way. Some Decorations, Piston's head, Ladders and Sugar Cane will also displace water. In survival mode, blocks take a longer time to break while the player is underwater.

Using a redstone wire, a one-block water flow can be redirected by supplying power to the source block, which will cause it to reset the flow towards the now-nearest terrain depression. The flow can then be put back so that it is not redirected until a block change occurs again, as seen in this video. This re-calculation is made because redstone wire when toggled changes the block from redstone(on), to redstone(off). whenever a block updates on any side of water, the water re-calculates where to flow, but does not cut off its current direction of flow. By using the fact that flowing water destroys torches, it is even possible to create multi-usable water toggles, as seen in this video.

Water can flow up to seven blocks away. (Eight blocks if you count the source block.)

Springs
In Infdev mode, springs can consist of either Water or Lava. Springs are randomly generated in caverns underground and sometimes above ground. Springs can also be placed by the player by picking up Water from the ocean by use of a bucket and then placing the Water again. A spring will generate Water which cannot flood a room because Water cannot spread on the top of another Water block. If a spring is removed, all Water that was created from it will also be removed, which makes it hard for things to be ruined by springs.

Infinite water source
An infinite water source is an endless supply of water that is either created naturally or by the player. Whenever the player uses a bucket to scoop water out of this source, it will just fill back up again, thus meaning it is an infinite water source. For more information on this go to the infinite water source tutorial page. It is commonly made by making a 2x2 square of water, or a 3x1 square of water, only retaking the centre square.

Fire extinguisher
Water will destroy any fire block it flows into, and will also extinguish burning players or mobs. It will also destroy lava in many situations (not all). Also, dumping water while in the lava can get the player trapped under the resulting obsidian or cobblestone.

Cobble Stone Generator
If the flowing water and flowing lava blocks collide on the same level or flowing water falls onto flowing lava, cobblestone will be created and regenerated in the same spot whenever mined, providing a 100% renewable way of collecting cobblestone.

This will not work with source blocks, as a water source block affected by lava will turn into stone and lava source blocks affected by water will turn into obsidian with no chance of retrieving the liquid for either case.

Stone Generator
If flowing lava falls onto flowing water, or a water source block, stone will be created and regenerated in the same spot whenever mined. When used in combination with a pickaxe enchanted with Silk Touch, this will provide a renewable source of stone and forgo the process of cooking cobblestone to create stone blocks.

Water for Obsidian
Water can be used for making obsidian. If flowing water hits lava source blocks (not flowing lava blocks), the lava source blocks will turn into obsidian. Obsidian can only be mined using a diamond pickaxe.

Water for clearing tall grass
Water can be used for flushing away tall grass for building. This is also an efficient way to harvest wheat seeds and to gather rails from abandoned mine shafts.

Water as blast controller
Water has 500 blast resistance. If a layer of water exists between a destructible block and common types of explosions, the water will absorb the force of the blast, and the block will not be destroyed.

A one-block-thick water screen will stop most explosions, such as from creepers, from reaching the other side. However, a player laying multiple blocks of TNT should mind the placement of the explosives, as primed TNT entities may launch each other through the water screen.

Water Elevators
A source block placed high above the ground will form a waterfall. (In Classic, a similar effect could be managed with sponges.) These can be used to swim safely up or down a great height. Since Infdev, swimming halfway off of a falling-water tile (that is, "on the edge" of the waterfall) lets a player avoid damage from drowning while swimming up or down.

Water ladder
Water can be used to facilitate quick climbing in a strictly vertical manner. The accessible portion of this structure is a 1x1 shaft, but if created above ground would require 3x3 blocks of horizontal space.

Since doors prevent water flowing through them, placing one under a water ladder will allow easier access due to the lack of excess water pushing you away.

Note that small water ladders can allow you easy entrance into underwater caves you've already built into.

P.S. Don't forget to pick it back up with a bucket if you plan on re-using it.

BASE Jumping
Water can be used to jump off of buildings and structures that would otherwise kill you by building a pool to land into. For each sixteen blocks of altitude the water must be one block deep, if the jump altitude is higher than sixteen blocks and the water is only one deep damage is taken from the total altitude minus sixteen (19 is safe). This can be used along with water elevators to enter and exit a very deep mineshaft or cave in a matter of seconds, saving time, and also saving the wood and stone otherwise used to make ladders and steps. It is recommended that you make a fairly wide pool in case you hit the edge and die. You can also hold the jump key to land in water only 1 block deep if necessary.

Water Brake
Alternatively, you can create a floating "water brake", using water held in mid-air with ladders, signs, or other non-solid blocks that resist water. Two or three blocks above the bottom of your vertical mineshaft, place a ladder to support the water block, then place the water block above the ladder. The way this works is that when the player collides with the water, it reverts the falling distance to zero and slows the player's downward velocity dramatically. The player can then safely land on the solid floor in a 2 block high air pocket under the water without taking fall damage or having to swim.

Water Tram
Road-like canals can be built with flowing water contained by signs, pressure plates, or similar blocks. This provides horizontal transportation by boat that is significantly faster than sprinting.

Water Bucket
Water can be collected by right clicking on a water block with a bucket, giving a water bucket. However only water spring/source blocks can be collected, not shallow flowing water.

Underwater Bases/shelters
If the player digs 3 blocks down into the bottom of a lake/water body, then digs into the wall of the hole (at least two blocks high), an underwater base can be made. To stop the water from flooding the base, dig the hole through which you enter 1 block deeper than the base's floor. Also, if you want to mine underwater, you can prevent drowning by digging a three block deep hole underwater, then going into the hole and covering the top with any material that blocks the flow of water. Alternatively, players may dig into walls or use signs to create air pockets. The hole will drain, because the water in that hole is flowing water, not a water source block. Cutting off the flowing water from the water source blocks the ocean is made of will drain the hole. If you wish to make a base on land that is hidden by water (to minimize theft or griefing in multi-player), you can use this method: Find a lake or body of water. Go to the bottom, and dig a 1 block hole as deep as you want it to be, then fill the hole with ladders. The ladders will eliminate the water, and you can jump in the lake and climb in and out of the hole (Though in order to climb out, you must hold the space bar when you reach the top of the hole in order to swim to the surface of the lake) Once you have filled the hole with ladders, you can dig/mine a cavern as large as you wish. You can use this cavern as your home or a base.

Bugs

 * As of Beta 1.6, water that flows on top of objects that normally pop out of the way from water approaching from the side are destroyed as the block below is replaced with water.
 * On some occasions, water in one chunk does not flow into newly generated chunks. This tends to occur more often in areas with enormous differences in height.
 * One cannot see cracks from mining if the block is underwater and the player is not; this does not work in reverse.
 * Underwater air pockets may appear in the middle of the ocean occasionally.
 * Water dripping through signs, glass, fences, etc. looks odd. Notch has stated that it should probably not drip through glass.
 * Water does not drip when placed on half blocks. This includes both normal and upside down.
 * Water can be placed above block Y: 256
 * If you suffocate yourself (using Gravel or Sand) while underwater, your air meter (in regards to drowning) will be refilled upon escaping.
 * A water source will not form between two parallel water sources when the block below is also a water source. This is due to an off-by-one error in the code.

Trivia

 * Zombies and Skeletons can survive daylight if they are in water. Zombies in PE cannot survive daytime in water.
 * Endermen take damage, teleport, and become neutral when in contact with water. This makes water buckets useful for if you have accidentally angered an Enderman.
 * Dropped items in flowing water now move faster as of version 1.5.
 * The texture for water is generated procedurally - there is no animated water texture in minecraft.jar, nor in the terrain.png inside.
 * Blocks under water will only take longer to break if your head is under water. If your head is above water the block will be destroyed at normal speed.
 * If you sneak while in water, you will be as slow as if you were swimming in lava.
 * In Classic, water flows without animation. This means it's infinite unless a player blocks the water.
 * With the /give command, you can get the water block itself. This doesn't affect the physics similar to fire in which you can get the actual fire block. Also, if you have the water block and place it in the Nether, you can use water normally (but only if you have the block, NOT a water bucket).
 * While underwater, the player's FOV is lowered to simulate light refraction.
 * If there is a block in the water without a water source block directly beneath it, there is a small pocket of air beneath it. If a player swims up while underneath this block and holds the space bar, a glitch may occur; the water itself will look like air and will no longer seem to block light while holding the space bar. This glitch allows a clear view of the ocean floor, and also applies to lava. This glitch is client-side only, and may cause drowning in multiplayer.
 * Blocks take 5 times as long to break if the player is underwater, and 25 times as long if they are both underwater and not touching the ground.
 * If you have a waterfall with no blocks directly next to it on any side (diagonal is OK), you move faster up the waterfall. Signs, ladders, etc. are declared "blocks" in this case, and will make you move slower.  In other words, the pattern below will make you move faster up a waterfall (and slightly slower down the waterfall). In the diagram below, A is air, B is blocks, W is water.  As long as you maintain the four air blocks around the water, you will move faster upwards.
 * Since 1.8, particles can be seen throughout the water. This is most noticeable underwater, but can also be seen above. The particles suspended in water are the same as the particles seen near bedrock level.
 * Prior to 1.0.0, the Silk Touch enchantment could be used to gather ice in Survival mode and bring it to the Nether, making it perfectly possible to bring water to the Nether.
 * Briefly in 1.9 Prerelease 5 both water and lava would appear when surrounded horizontally by four source blocks, regardless of the block underneath. Additionally water would form source blocks underneath new source blocks, creating pillars as far down as it could go unobstructed.
 * As of 1.9 Prerelease 6, when water is not beneath any block, it will freeze in snowy biomes. However, breaking the ice block will still release water.
 * Water flows at 0.25 seconds per block (1/4 second/Block), taking it approximately 1.75 second to reach the maximum water range on a flat surface (7 blocks excluding the source).
 * The only hostile mobs to be able to swim/ford upstream towards the player are cave spiders and normal spiders. The rest do not have enough strength and are swept downstream.
 * If you look at water from a distance it will appear to be vibrating.
 * Sometimes a mob may get stuck in vertically flowing water, causing it to drown and die.
 * Before version 1.3.1, it was possible to drown in a 3 block deep water pool if the player is unable to place blocks. The knock-back of water damage will keep the player from swimming up.
 * In Peaceful mode, it takes twice as long to drown because of the constant regeneration of health.
 * As a bucket can hold one source block of water (or lava), and each block is 1 meter by 1 meter by 1 meter, and 1 liter is .1^3 meters, a one meter cube has a volume of 1000 liters. The player seems able to drink one bucket of water in a single go. To put that into perspective, that would be equivalent to drinking 500 days worth of water, if one drinks the recommended 2L/day all at once. That amount of water would kill the average human very quickly.
 * Before version 1.3.1, it was possible to drown in a 3 block deep water pool if the player is unable to place blocks. The knock-back of water damage will keep the player from swimming up.
 * In Peaceful mode, it takes twice as long to drown because of the constant regeneration of health.
 * As a bucket can hold one source block of water (or lava), and each block is 1 meter by 1 meter by 1 meter, and 1 liter is .1^3 meters, a one meter cube has a volume of 1000 liters. The player seems able to drink one bucket of water in a single go. To put that into perspective, that would be equivalent to drinking 500 days worth of water, if one drinks the recommended 2L/day all at once. That amount of water would kill the average human very quickly.