Water

Water is a common resource found in nearly any biome, generally other than the Desert. It flows more freely than Lava. Candles, Torches, and Flaming Arrows do not emit light underwater, but Glowsticks and some other light sources do.

By default, players aren't able to swim in water, only jump from the bottom. With the Flippers accessory equipped, the player can swim by jumping repeatedly from any point within the water. The Rocket Boots also work under water.

Mining Underwater
When mining in the underground, players will no doubt encounter water. This can be a nuisance, but there are a few things that can be done.

The water can be removed entirely by placing any block in the space it occupies (no longer works as of 1.1). The obstacle can also be removed by draining the water into another cavity. Either dig an outlet at one edge or from the bottom of the pool.

When exploring a pool of water, first make sure to have a way out. Check for monsters hiding in the water, then either throw a Glowstick into the pool or dive in with one in hand to see if there is anything of interest (such as nearby caves or mineral deposits).

To produce light underwater, remove a block a little way into the wall so that it forms an air pocket and place a torch there. Alternatively, Glowsticks may be used when digging underwater. They provide less light but can be thrown. These are especially useful when digging downward, because Glowsticks fall when the block beneath them is removed. This way, players can dig and light their way at the same time. If they are available, a Mining Helmet or an Orb of Light provide easy hands-free lighting.

Another way to get past water is by digging a hole two blocks wide and four blocks deep at the bottom of the pool. Then place two blocks of any stable material to seal the top. Digging down from that point will form an air pocket at the top of the shaft, allowing the player to breathe and place torches.