This menu is used for placing all water. Set the height that you want the water in the "height" box (use spacebar to "eyedrop" height of surrounding terrain, or SHIFT-Spacebar to eyedrop nearest water source). Define the area you wish to 'fill' with water by left click + drag on the terrain. Then click "apply". To erase water, define the area to be erased, then click "clear". It is best to make all of the water in your map at the exact same height. It won't hurt anything to make water of varying heights, but the mirror effect (water reflections) will not work properly. Note that infantry can travel through water if it's shallow enough. Infantry are able to wade through water up to 2.5 meters deep. (for example, if your terrain was at a height of 10, your water would need to be at 12.5 meters or less for infantry to be able to travel through it)