Underwater is traded from the Kalm traveler with a Guide Book. The Guide Book is morphed from a Ghost Ship in the Junon Underwater Reactor or the Battle Square. Only one Underwater Materia can be obtained, but only one is needed.
Underwater removes the 20:00 timer from the Emerald Weapon fight. However, it is possible to beat Emerald Weapon within the limit. This means it should only be used if the player needs the extra time. The Materia can be given to any character, however, Barret's Missing Score weapon always treats the Underwater Materia as if it has 0AP regardless of how much AP it holds, meaning it should not be given to him as it will not increase his damage.
The Underwater Materia gains AP, but will never level up or grow into another one. Underwater Materia can be mastered, but only if it gains exactly 16,777,215 AP.