There are a lot of benefits to water birth. My favourite book on the subject is Janet Balaskas' Water Birth Book. Unfortunately I don't own it anymore, it was a book I possessed in the States and was one of the many things that had to be left behind. Gentle Birth Choices by Barbara Harper also details water birth.
Labouring in water has been proven to be a safe and effective option for pain relief. It's often anecdotally referred to as an "aquadural" because of the sense of relief and relaxation that many women get on entering the water. We use water for relief in many other scenarios - hydrotherapy pools, for example, it makes sense to use it for birth as well.
One major benefit to a birth pool, in my opinion, is that it creates a space that is exclusively the woman's (unless she chooses to invite her partner into the water). I think it creates a feeling of privacy and comfort to know that this space is yours, and no-one is going to intrude on that. It also allows you to be in positions that might otherwise be uncomfortable due to pregnancy aches and pains (or in some cases more serious pregnancy related pain such as PGP). The sense of being weightless, and being able to turn over with ease, is something that you may really enjoy when you're 9 months pregnant!
On a practical note, it also makes clean up easy for a home birth too, most home birth pools come with a pump to drain all the water, and a liner that can be lifted out and disposed of immediately. There are several kinds of pools you can hire or buy, here are some common kinds:
-inflatable birth pool (Birth Pool in a Box, Made in Water, etc*) - advantages are that it's easy to store, can be pre-inflated if you have the space, and some women particularly like the soft sides and floor;
-rigid birth pools (The Birth Pool Company, etc*) - advantages are that these are often larger and deeper than inflatable pools so can more comfortably accomodate partners too, or provide more room for the woman to move around, some women also prefer rigid sides to lean on or against;
-heated birth pools (Birthworks Octagonal Pool, etc*) - advantages are that these can be assembled and filled before labour, sometimes not even requiring a water change, they can provide great relief pre-labour and in early labour which isn't possible with an unheated pool.
*Please note, other than Birth Pool in a Box, I have no personal experience with any of the companies listed, so I cannot give a personal recommendation.
Hopefully this has been of some help, have you had a water birth, or would you like one? I'd like to hear your thoughts!
For more information, check out the AIMS leaflet on Water Birth.