Canteen
The Canteen is an sub-essential tool for bringing Purified water with you on the go.
A non-purified one can fill little over half of the water bar and can be refilled by doing the same motion as normally drinking water (without crouching). It can also be filled with purified water. However, doing so will remove the purified water source block and only give the canteen one use. The best way of getting purified water in your canteen is to first fill it with normal water and then put it together with a Charcoal Filter in any crafting table.
The reason you want to drink purified water is to prevent 2 debuffs from occuring: Thirsty and Parasites.
Despite the Stone of the Sea bauble removing the Thirst effect from dirty water when you drink it, it does not make it refill 3 thirst bars like it does when when it is purified, instead refilling 1.5 thirst bars (per each drink).
Upgrades to the Canteen
If you want to upgrade the amount of water able to be held by a canteen, you can upgrade it into an Iron Canteen(6 uses). Crafting it uses the same pattern as the regular canteen but with the leather replaced with iron, and the canteen placed on the center.
If you defeat a Dragon, you can use its materials with an Iron Canteen to craft a Dragon Canteen(8 uses). Dragon Canteens have the ability to automatically purify water when filling it up, so you do not need to use a Charcoal Filter to be able to drink from it safely.