While the Water are essentially left unexplained in the final version of the movie, the deleted/extended version of the scene better explains this.
The Water of Sight that Thor and Erik visit is in a Norn Cave found somewhere on Earth. Thor explains that there is a "reflection" of the Norn Cave found in Asgard. The Waters are let a person speak to The Norns, who require a sacrifice of life to communicate with them. The Norns can see "what no eye can, what is, and what's to come."
Typically, the living sacrifices to the Norn do not survive, but Thor has "more life than most" to be consumed by the Norn. In the original version, Thor does not experience visions in the Water of Sight, The Norns explain the Infinite Six (or the Infinity Stones) to Erik while they simultaneously consume Thor's life.
Obviously, the final theatrical version differs. Any traces of the Norn have been removed, and the Water can now provide Thor with strange, prophetic, and expository visions.