A water hazard is marked by yellow paint or yellow stakes.

A lateral water hazard is marked by red paint or red stakes.

 

If the ball is between the lines formed by the yellow or red paint or stakes the ball is in the water hazard. So the ball can be on dry land and still be in a water hazard.

Ball Is In Hazard According To The Imaginary  Line Made From 2 Stakes

Water Hazard

Water Hazard Penalty Drop Options Ball played from Point A to Point B ends up in a Water Hazard at Point C, where the green line is the path the ball took. Your options are

1 Play the ball as it lies.

2 Drop a ball not nearer the hole under a penalty of 1 shot from where the last shot was played from. Can be teed up if played from the tee area.

3 Drop a ball under a penalty of 1 shot behind the hazard as far back as you want keeping a direct line where the ball entered the hazard (as shown by  X) and the hole.

Lateral Water Hazard

Lateral Water Hazard Penalty Drop Options Ball played from Point A to Point B ends up in a Lateral Water Hazard at Point C, where the green line is the path the ball took. Your options are

1 Play the ball as it lies.

2 Drop a ball not nearer the hole under a penalty of 1 shot from where the last shot was played from. Can be teed up if played from the tee area.

3 Drop a ball under a penalty of 1 shot behind the hazard as far back as you want keeping a direct line where the ball entered the hazard (as shown by  X) and the hole.

Only if in a lateral water hazard (red stakes) you have 2 more options

4 Drop a ball under a penalty of 1 shot within 2 club lengths not nearer the hole from where the ball entered the hazard.

5 Drop a ball under a penalty of 1 shot within 2 club lengths not nearer the hole on the opposite side of the hazard the same distance from the hole.