Recently somebody by the name of LeslieGilliams found out that water caused huge amounts of lag in the new 1.8 update.
Many people responded to the thread he made and a few posted their computer specs.

I compared all of them and found out that all the people who were having something in common:
Either they had a cpu that did not support AVX.
Or
They were using a 32bit OS (Which is unable to use AVX)

We think that Minecraft may be relying on Floating Point calculations Which are done much more efficiently with AVX and thus causing lag on systems that do not support it.

Please do research into this topic and try to fix it as soon as possible, as Minecraft is unplayable for a lot of people by this.

Link to the thread: http://www.minecraftforum.net/forums/minecraft-discussion/recent-updates-and-snapshots/2205517-i-think-i-found-the-source-of-the-extreme-lag-in?page=8