Water is a natural resource. the oceans and lakes consist of waterblocks.
Ocean Water is self replicating, but only below the sea level, any ocean water above sea level converts to normal freshwater.
There are special rules about when a lake becomes a part of the ocean and vice versa.
One block of Water turns into 1 Distilled Water.
Water is also used in Nuclear Power Plants (in the near future coal, oil and biomass) where it is usually pumped into a closed boiler with a Pipe at the top, where it turns into steam and can be fed into the Steam Turbine in order to produce electricity.
Spilling water over porous blocks (Soil, Sand, Forest Floor) makes them moist, this influences the vegetation (i.e. Grass in that area over time. This is a crucial process for the upcoming in-game agriculture. The rocky banks of lakes and rivers will start getting covered in Moss and soft ground like soil and forest floor will gradually transform into sand when flooded by ocean water for an extended period of time.
Currently the only way to use water in the manufacture of complex blocks or structures is to pump it into your inventory using the Pump Tool. There are plans for making it possible to connect water pipes to the factory construction etc.
To move and store water more efficiently, one can build and use a Pipe system coupled with a Pump block to move water from one place to another using electricity. Note: When pumping out of the ocean, the water will not disappear and the water coming out of the other end of the pipe will be freshwater unless it drops into another ocean water body.
When freshwater falls on top of ocean water, it gets "absorbed", in other words it disappears.
Will be updated after the upcoming game update with the water-releveling system Expect any reservoir of ocean water smaller than 250'000 m^3 to turn into freshwater.
Water has been around since the beginning of the game.
Recent change in game dynamic includes different levels of moistness as attributes of many blocks which can be influenced by the presence of water above or to the side of the block.
Currently developing a new feature which will spread out any lump of freshwater (non-replicating water) into a near perfect level lake.