Water Lily is a particularly useful technique early on in Ōkami. When acquired, Galestorm can be used to blow lily pads across the water's surface, allowing for faster travel than simply drawing individual lily pads. This tactic is later used for a certain sidequest in Sei'an City.
As previously stated, Water Lily is very useful for a major portion of Ōkami. However, once the Water Tablet is obtained, it renders the technique obsolete, except for the aforementioned sidequest.
To use Water Lily, draw a fully enclosed circle on the water surface. This creates a lily pad that can be used as stepping stones for Amaterasu to catch her breath between swimming sessions if she ran out of air. Only three lily pads can exist at a time, and when the fourth is drawn, the first one disappears with a bit of sparkles, and so on. A lily pad can also disappear when it collides with another one, or when it is created on magma or poison.
When Amaterasu and Issun returned to Kamiki Village after restoring Shinshu Field, they found the village to be rather lively, more so than usual. It was because Mr. Orange was preparing a sacred dance known as the Konohana Shuffle. The dance was intended to revive the spirit of the sacred tree Konohana. However, Mr. Orange needed the combined strength of all the sakura within the village in order to perform the Konohana Shuffle. Once Amaterasu revived all the cherry blossoms, Mr. Orange began to dance, and, with Amaterasu's help, successfully revived Konohana. Sakuya was overjoyed to be at her peak of strength once again and praised Amaterasu and Issun for their efforts. When she disappeared into the tree, Hasugami appeared before Amaterasu and bequeathed to her the power of Water Lily.
Spoilers end here.
When Water Lily is used, the kanji 咲 ("saki", "bloom") appears.
When using Water Lily, a frog can sometimes be seen jumping off the lily pad.
Although Water Lily is not able to be acquired in Ōkamiden, a variation of it can be used by blooming an existing bud to create a platform of lily pads.
Lotus Plant metaphorically represents nirvana in Buddhism inasmuch as the lotus seed can remain ungerminated for centuries, then suddenly emerge from a pond of mud and rising its flower untainted, like awakened nirvana remains untouched by the world of phenomena, passions, karma, suffering and ignorance.