Tribal members with the gift of waterbending have the ability to manipulate water through its various forms as a liquid, solid or vapor. They can push and pull at the water to create massive water columns or form solid ice walls for defense, or use finer movements to create water whips, ice daggers and discs that can be lobbied back at an opponent. Water can also be whipped around an opponent then suddenly frozen solid, trapping the enemy alive within a frozen cocoon.
Some Waterbenders (mostly female) have the added gift of healing ability which redirects the coolness of the water into healing energy. Even rarer, is a darker and more sinister form of waterbending, known as "bloodbending", the ablity to manipulate the fluids within another person to control them. It can only be done under the light of a full moon by a master water bender trained in the dark art and it's very existence is only known by a few waterbenders themselves.
The Water Tribes gain their power from the balance of the opposing forces of the moon and the ocean. Their power is strongest at night when the moon rises and pulls at the ocean tides. Their hand movements mimic the ebb and flow of the tides (push and pull) which absorbs incoming energy and redirects it back with equal force to create balance.
Tai Chi Style of Martial Arts
Waterbending mainly incorporates the Tai Chi style of martial arts which centers around the balance of opposite energies (the ying and the yang, push and pull, dark and light, forceful and yielding). The force used is not so much about hard power but about absorbing energy and redirecting it back. When attacked, this form of martial arts evades, redirects and blends with energy forced at them.
Upon contact, a waterbender’s defense is to redirect an opponent’s energy back at them with equal force (kind of like hitting yourself). The success of these maneuvers however depends on how well the bender is able to feel, detect and absorb the energy coming in.
Novice Waterbenders (beginners) initially can have difficultly mastering some of these techniques if they simply try to manipulate the water, (like Katara in the first season). Whereas, Master Waterbenders (like Master Pakku) are able to feel the strength of energy from their opponent and match the energy of the water accordingly making their moves seem fluid, balanced and almost anticipated.
(Thank you BlueSigma for the link)