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.

Underground pools of water can be spotted by the glowing Jellyfish which spawn there. Water is only found down to a certain depth before being replaced by pools of lava and evaporates immediately if it enters the Underworld.

Mining Underwater
When mining in the underground, players will no doubt encounter water. Players can avoid the water altogether, if they wish. Otherwise, there are a few things that can be done.

The water can 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.