Potions of water are rare potions that can be turned into potions of holy water by dropping in on an altar of your god when you have earned enough faith. You can then dip (B) an item into a potion of holy water to make the item blessed. Potions of water have a slim chance of being made by mixing empty bottles with a well or fountain.
You can exchange three small medals for a bottle of water at Miral and Garok's Workshop, there is also a small chance that monsters drop, or random loot in dungeons. In Elona+ you can use a Pot of Fusion to combine a salt water solution, a rod of firewall and wood piece into a bottle of water.