Ships, when owned by a land race, will travel on water. The converse is true for a water race: its ships will travel on land.
If a land nation sees some good mines or farms in the water, it can occupy that sector using Swimmers or Scuba_divers army units which have the W (Water) flag. Similarly, a water race can occupy land sectors using armies such as Walkers which have the L (Land) flag. Notice that any other army or spirit with the W and L flags will work fine.
The army types mentioned above all have the f (front line) flag, so they can be unloaded from ships onto the desired sector.
Once the sector is occupied you cannot move people into it or they will drown (or suffocate). But you can (at great expense) build a bubble over the sector (or cast a change-altitude spell) which will allow your people to move into it, even if it is a water (or land) sector. This provides a means for colonizing the oceans (continents).