Water toolset
As with other tools, they are split into Brush and Procedural groups. Both feature methods to paint the water mask. The waterBrush tool is useful for touching up small areas as required. The Brush tool paints directly to the coverage mask on the water plane. But generally we will make good use of the "water generator" tool.
Generator tool
First button in the Procedural toolset is Generator which creates the water mask based on terrain height. Very simple to use, the only parameter we might want to adjust is Depth attenuation. This is how far in world units we want to see under the water plane. This is used to feather shoreline transparency.
The following is an image of a mask for a single zone, the dark areas are hidden. On the right-hand side is a 3D view of a zone where terrain has been flattened so that we can see the mask resolution along the shoreline.
If the resolution of the mask is too low (or high), hit the Resampler button and set the resolution you want (remember to...