The Red water is an important plot detail in the original Forbidden Siren. The red water appears in the atmosphere of Hanuda village when the Siren blares. It is symbolically the blood of Datatsushi, and is constructed with a crystalline structure that appears to replace the blood of living things. All the water in the village becomes red water, threatening all those who still remain human.
It's implied that the red water comes from the mirror pool (赤水の影鏡 Akamizu·no·kagekagami), a part of Hanuda from 684 which connects the alternate dimension from Hanuda with Datatsushi's dimension.
The water has massive regenerative properties, so much that dead humans revive as Shibito. In terms of gameplay, whenever the player is injured, the red water falling as rain regenerates the player's health more quickly than normal wounds. Biologically speaking, the red water replaces lost blood, until the crystalline liquid fully runs through a person's veins. Once this happens, the human is bound to Datatsushi and becomes a Shibito.
Once the siren sounds (every 6 hours), the villagers of Hanuda bathe in the Mana River,its a religious procedure from the local Mana religion called Umi-okuri (海送り · Sending / Going to the sea) and Umi-gaeri (海帰り · Returning from the sea), every time the procedure is completed, the shibito evolve into more insect-like forms, reinforcing their bond with Datatsushi and losing their humanity.
In Siren Blood Curse, the red water is not known as such, and is only referenced as 'blood' that is falling from the sky as rain. Its function is almost essentially the same as that in Forbidden Siren, healing the player's health. In the remake, however, Red Water aka ‘blood’ comes from “Inferno” itself, created by Kaiko. It seems that Red Water represents Kaiko’s future return from Inferno.