I have heard it a couple of times in conversations, and there's a movie whose title is "It's in the water". I think it expresses the acceptance of a situation that can not be prevented, but I'm not sure...
In that movie, the line is a joke. One character tells someone else that he (the speaker) became a homosexual because of something in the local drinking water. This is obviously ridiculous. Soon word gets out that the drinking water causes homosexuality and panic follows.
The phrase is not an idiom with a fixed meaning. However, from time to time people have claimed that there were conspiracies to control or influence people by putting something in the drinking water. Thus, the phrase "it's in the water" might be used in a satire on elaborate and implausible conspiracy theories.
On the other hand, the phrase may be used by advertisers who claim that drinking or bathing in certain waters is beneficial to your health.
"It's in the water" also may simply mean that something is in the water.