"Water is the driving force of all nature. " Leonardo da Vinci
Let's begin by differentiating between a drip pan and a water pan. Sometimes they are the same thing, sometimes they are different. Drip pans go under the food. Water pans go over the heat source.
The purpose of a drip pan is to collect the flavorful juices that come off the meat for use in a sauce or stock, to keep them off the flame and prevent flareups, and to keep oil from coating the water in the water pan preventing evaporation.
If loaded with water, a drip pan can also absorb heat from fire below, reduce the grill temp, level off fluctuations, and add humidity to the cooking chamber. My Ultimate Turkey recipe is a good example of how to put a drip pan to use. The pan is filled with water, wine, herbs, carrots, onions, celery, and when you're done, you have a smoked turkey stock that becomes the base for the most incredible gravy. This will also work for beef, but in general, not for pork or lamb. Their drippings don't usually make good gravies or sauces.
When you use a drip pan, keep an eye on it so it doesn't dry out and burn all your precious gravy. Keep adding hot water so the liquid is always at least an inch or two deep. You can check often, it won't hurt.
Some smokers, like the Weber Smokey Mountain, come with a water pan. Water pans are not designed for making gravy although you can use it for that if it is clean. In my articles on the best setups for different grills and smokers, I advocate using a water pan under the meat or over the fire for smoking. Here's why:
1) Water helps you keep the air temp down to 225°F, a temp I recommend you learn to hit with regularity (read my article on calibration). In a vertical smoker like the Weber Smokey Mountain, where the water is directly above the coals, the water will never go higher than the boiling point, 212°F. That's a law of physics. In many other cookers, like a Weber kettle, where the water pan is along side the coals or at a distance, even if the air temp is 225°F, the water will not likely go above 180°F because it cools as it evaporates, a process called evaporative cooling. The AmazingRibs.com science advisor Prof. Greg Blonder explains it thus "Think of a hiker in Death Valley where the desert floor can be 140°F. Hikers will not get hotter than about 100°F because their sweat cools them."
2) Water helps stabilize the temp in the cooker and minimize fluctuations because water temp takes longer to rise and fall than air.
3) A water pan can block direct flame when you need to cook with indirect heat.
4) A water pan becomes a single radiating surface and evens out hot spots.
5) Water vapor mixes with combustion gasses to improve the flavor.
6) Water vapor condenses on the meat and makes it "sticky" allowing more smoke to adhere. This smoke enhances flavor and sodium nitrite in the smoke creates the smoke ring.
7) In electric smokers where there is little air movement because there is no combustion, the pan can add humidity to the atmosphere in the cooker to help keep the oven from drying out your food. In cookers that have combustion going on, sooooo much air is moving through the chamber that the water vapor has little impact on the humidity. This can vary significantly depending on the design of the cooker. Also, if there is an oil slick from drippings on the water, it cannot evaporate.
8) The humidity keeps the meat surface moist, it evaporates and cools the meat, and that slows cooking . This allows more time for connective tissues and fats to melt.
Try to use hot water. Cold water will cool your oven down a lot and should only be used if you are running hot and need to cool it down. And fill the pan to just below the lip so you don't have to keep opening the lid to refill. Put it above the hottest place in your cooker so more water will evaporate.
What goes in the water pan?
Pitmasters argue over what should go in the water pan. Not surprising since we argue about everything, even the meaning of the word barbecue. Some say beer, wine, apple juice, onions, spices, and herbs. Some folks like to put sand, dirt, gravel, or terra cotta in the water pan. What works best? There's a reason it is called a water pan.
Drink the beer
Drink the beer. Drink the wine. Drink the juice. Put the spices on the meat. Just use hot water. Don't waste your money. Many of the compounds in these other liquids will not evaporate and even if they do, they just make no impact on flavor. You may be able to smell them, but the number of flavor molecules in beer, wine, or juice are so few that even if they were deposited on the surface, they would be spread out so thin you would never notice them. The flavors of the spice rub you put on the surface of the meat, the smoke, and the sauce you chose, are much much stronger and will mask any molecules of apple juice or whatever else is in the pan that might alight on the meat.
The AmazingRibs.com science advisor Prof. Greg Blonder says "If you want to increase humidity, and you do, fill the pan with those red lava rocks sold at garden stores, and then add the water, but don't cover the rocks. They are very porous so they act like sponges, and the large surface area pumps more moisture into the air. And don't let fat drip into the pan because it will quickly coat the surface and prevent evaporation."
If you line a water pan with foil, cleanup will be a lot easier. When you are done, you will have a pan full of smoky water and fat. Let the pan cool and the fat should solidify. If not, throw in some ice cubes. Then it is easy to peel off the fat and discard it in a garbage bag. Usually the flavor compounds remaining are weak and not worth saving. I discard the liquid in old milk bottles, or flush it down the toilet (be prepared to clean the toilet after). If you are using charcoal you could mix the drippings with ash and throw them out with the trash. Don't pour them on the lawn or garden. They will just attract critters.