Clean water is essential to life. Part of the reason why cities in the Middle Ages could only grow to a certain size was the lack of water purification, since regrettably much of the skill in making aqueducts had died out with the Romans. Crafts such as tanning and the retting of flax require considerable ammounts of water, which becomes polluted during the process. Such crafts were normally restricted to be practised outside the city walls, downstream of the city.
In some times and places of the medieval era, water was the beverage of choice (or necessity) for the majority of people. In other times and places, mostly those with larger, more crowded cities, the drinking of plain water was considered dirty and diseased and the drink of choice would be heavily watered down beer, or for those with more money, wine. For example, Tudor era english ships carried barrels of weak beer rather than fresh water, the alcohol slowing growth of bacteria.
Water was also required to grow crops, irrigation methods were sometimes employed to better distribute this resource.