Water heater stands are installed directly beneath the water heater. Because they change the height of various connections to the unit, they must be factored into measurements before a unit is purchased.
Water heater stands are not generally needed when using gas- or electrical-powered water heaters, and many models are designed to be placed directly on the floor. In many areas, however, oil-fueled water heaters must be placed on a stand to prevent fire if heating oil spills on the floor. Local regulations vary, but these stands typically need to be approximately 14 inches off the ground. Some newer models are designed to prevent these types of fires and may not require a stand. It's important to check local regulations before purchasing an oil heater as the cost of later adding a stand and rerouting piping can be expensive.
Stands are still sometimes used even if they aren't required. A common threat to water heaters is corrosion at the base of the unit caused by water building up. While a stand might not prevent these problems, it can make it easy to drain water away. If the garage or room the water heater is placed in is subject to water buildup, and stand can make keeping the unit clean simpler.