Yes, I wrote awater
It currently only works for the zone files that have an .S3D file extension, not the newer .EQG zones.
The .wtr file allows the server to 'know' where the water is in a zone, for things like fishing and swimming skillups. It is also used in the mob movement code to determine the correct 'Z' coordinate for mobs (i.e. mobs in water are not made to walk along the ground).
For zones with no .wtr file, you will probably find that any mobs moving in water move along the sea-bed rather than moving freely in three dimensions within the water. Also I think people can fish anywhere in a zone that has no .wtr map, even on dry land!