A water clock uses flowing water to measure time according to the National Watch and Clock Museum. Water clocks are classified as either "outflow" or "inflow" water clocks based on the way liquid moves in relationship to the primary vessel.
Time is measured with an outflow water clock by filling a vessel with water and slowly draining it away at as even a rate possible. Markings inside the vessel are observed to gage how much time passes. According to FactMonster.com, this type of water clock is similar to the clepsydras used in ancient Greece around 325 B.C. Greek clepsydras were stone bowls with sloping sides that permitted water to drip at a nearly constant rate from a small hole near the bottom.
An inflow water clock works in the reverse manner as the outflow model. This type of water clock uses liquid to fill up a container rather than drain it away. As the water rises, time can be measured against hour and minute marks made inside the vessel. FactMonster.com reports that a type of inflow water clock is still used to this day in parts of North Africa. A metal bowl with a hole in the bottom is set within a larger body of water, and as the water seeps slowly into the bowl, it sinks within a set amount of time.
Because the rate of water flow is difficult to control accurately, both types of water clocks have a varying margin of error.