Waterskins are made at a Leather works from any form of leather. 3 waterskins are produced for every 1 piece of leather used, much like goblets. So don't make the mistake of ordering the production of 15 waterskins for your military or you'll end up with 45 of them in total. Soldiers can be ordered to carry water using their waterskins from their specific squad menu. This is useful because they will not have to leave their post to get a drink for an extended period of time. This can also be bad because they will only fill their skin with water, and eventually will become unhappy due to alcohol deprivation. When filling a waterskin a soldier or a hunter will always fill it to the level of 3 units of water.
When in adventurer mode the water in the waterskin will freeze after some time in very cold weather. The resulting ice can be licked instead of drunk but doesn't quench thirst nor melt from this action.