We normally think of a pump that pumps water or fluids say like a water pump in your car which circulates water around the engine and radiator to cool the engine. That water as it passes through the radiator is cooled by the air passing through it, and then the cooler water (which is still very hot) is passed back through the engines core to take away the much hotter engine temperature. We call it a water pump because it is pumping water.
A water heat pump is similar in that water is circulated through a cooler source, for example through a network of pipes underground which takes the heat out of the water. The cooled water is the returned to the home or office where the hot living space gives up its heat to the cool water flowing through the network of pipes inside.
The process is similar but not the same as a conventional air conditioning system. It is not the same because electricity or other forms of energy are not used to create hot or cold, but a water heater pump is a very low powered pump that moves hot water to a cooler place where a temperature transfer takes place and then the pump returns it back to the hot place.
Of course the same is true in reverse – the point being that water is pumped around to move heat stored in the water. These systems are closed, meaning that it is always the same water that is circulated continuously, so water conservation is not an issue. No water is lost during the operation of the water heat pump.
The main benefit is that it is a green energy, and almost free to operate after the installation is complete. There are almost no moving parts and the actual pump is very low powered. While the installation cost can be higher than traditional air conditioning systems, the long run total cost of ownership is much lower and the environment will love you for your efforts to reduce green house gases.