Using charcoal in kettle grill
Well, the answer in each case is really "it depends."

Indirect grilling is a way to reduce the radiant heat from the coals reaching your food, slowing cooking. It's useful for cooking thick, dense foods where the radiant heat might overcook the outside before the inside is cooked through. This isn't desirable for thin foods, where you want to brown the outside of the food while the inside cooks-through.

I'm not sure what the water might be for. I suspect that, because of water's very high specific heat, some folks might believe that it helps evenly heat the air in the grill. Only problem with that is that is your grill has an outlet, either in the form of a vent in the cover or a chimney on larger models. Water vapor is just going to escape. What does stay in the grill is just going to condense on the inner surface of the grill and run down the sides and drop onto your food. Old soot isn't a flavor I want imparted to my ribeye.

Covering the grill keeps hot air near your food, helping to cook the food by convection. Again, this is for helping to cook through foods that might be burned if cooked only by radiant heat.