Discovered while reading the comments on MC-128337.

The bug

Water has a separate texture file which is used when water borders certain transparent and translucent blocks (a fix for MC-35790). This file is called "water_overlay.png", which is a rather confusing name - its very easy to assume (as has been done several times before) that the "overlay" part of the name means that this texture is instead used to cover the screen when underwater, which it is not; a separate texture is used for this purpose instead.

It is also inconsistent with other textures called "overlay", such as the grass block overlay texture, which is a texture overlaid on the sides of grass blocks for tinting, or the several leather armor overlays, which are used for regions which are not tinted. Unlike any of these cases, "water_overlay" does not appear to be overlaid on anything, but rather is a fundamental texture used by the water model in select cases.

How to reproduce

Easy - just compare the two files after extracting the jar.

The following steps can be used to prove what each texture is used for, and that they have distinct uses:

1. Download and apply the attached "water distinguisher" resource pack
2. Dive underwater
   1. Note how the underwater overlay texture looks
3. Now place glass next to water and note how the sides of the water look through the glass
   1. Note how the texture used here is different from the underwater overlay texture

Expected results

As from my testing it does not at all appear to be an overlay, that "water_overlay.png" would be named something less confusing, such as "water_behind_glass.png" or "water_still_side.png".

Actual results

The confusing name detailed here.