Step 2
Now the real work begins. First we need a couple of Channel Masks that we will use throughout the rest of this effect. To do this, go to the Channels Palette and drag any of the Channels, Red, Green or Blue, into the New Channel Icon as shown in figure 3. I chose Blue because it's closest. Call me lazy. This will create a new, identical channel.

With your new channel set as the active channel, invert it (Image>Adjust>Invert or Ctrl?Command+I). You should now have white text on a black background. Next, double click on the channel to open up the Channel Options Dialog and name the channel 'water' in the Name: field. Your channel should now look like the one in figure 4.

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Figure 3
Drag any channel into the new channel icon in the Channels Palette and invert it (Image>Adjust>Invert or Ctrl/Command+I). Double click on the channel to bring up Channel Options Dialog and name the channel 'water'.

Water.psd (water)

Figure 4
The finished 'water' Channel.

Intro / Step 1 / Step 2 / Step 3 / Step 4 / Step 5 / Step 6 / Step 7 / Step 8 / Step 9 / Step 10 / Step 11 / Step 12 / Final