Water simulation with a grid

Voxel-based solutions are fine for simulating liquids, and are frequently used in film. Ron Fedkiw's website gives some academic examples - all of the ones there are based on a grid. That code underpins many of the simulations used by Pixar and ILM.

A good source is also Robert Bridson's Fluid Simulation course notes from SIGGRAPH and his website. He has a book "Fluid Simulation for Computer Graphics" that goes through developing a liquid simulator in detail.

The most specific answer I can give to your question is that Stam's real-time fluids for games is focused on smoke, ie. where there isn't a boundary between the fluid (water), and an external air region. Basically smoke and liquids use the same underlying mechanism, but for liquid you also need to track the position of the liquid surface, and apply appropriate boundary conditions on the surface.

What type of water are you trying to simulate? Pools of water that ripple, or flowing liquids?

I don't think I've ever seen flowing water ever, except in rendered movies. Rippling water is fairly easy to do, this site usually crops up in this type of question.

Cem Yuksel presented a fantastic talk about his Wave Particles at SIGGRAPH 2007. They give a very realistic effect for quite a low cost. He was even able to simulate interaction with rigid bodies like boxes and boats. Another interesting aspect is that the boat motion isn't scripted, it's simulated via the propeller's interaction with the fluid.

_{(source: cemyuksel.com)}

At the conference he said he was planning to release the source code, but I haven't seen anything yet. His website contains the full paper and the videos he showed at the conference.

Edit: Just saw your comment about wanting to simulate flowing liquids rather than rippling pools. This wouldn't be suitable for that, but I'll leave it here in case someone else finds it useful.