A water brake actually introduces water from the boiler into the cylinder of the locomotive, which is operated in reverse gear. The water immediatly flashes to steam and creates backpressure in the cylinder that retards forward motion, up to the limit of the tractive effort of the locomotive. They worked quite well but were very operator dependent - that is, the operator had to be very careful in its operation to avoid damaging the locomotive.
To use the water brake, the engineer would put his engine in reverse, open the cylinder cocks, and then carefully open the water brake valve, closely watching the steam coming from the cylinder cocks. The trick was to get the maximum amount of braking effort without introducing so much water into the cylinder that it blows out the heads. It was a very fine line between maximum effecient brake operation and blown cylinder heads. This is probably the main reason they fell into disuse - their operation was too delicate to balance without causing major damage to the locomotive. A good operator could coax efficient braking from a water brake while a careless or less skilled one could seriously damage the locomotive.
A drifting throttle introduces wet saturated steam only into the cylinder via a valve that limits the volume of steam available. The wet steam in the cylinder while drifting (with the throttle shut) aids lubrication and gives the cylinders a little "cushion" of steam at the extremes of each stroke. A drifting throttle can also be used with the locomotive in reverse gear to provide braking but usually drifting throttle valves are an "on or off" type of a size and configuration that limits the amount of steam going to the cylinders, which is less than the amount that would damage the locomotive.
I can't remember where I read this information on how a water brake works but I was always curious about them. I also don't know exactly when they fell out of favor but some locomotives built in the 20's and 30's for mountain railroads (such as the D&RGW) were originally equipped with them.
Phil