At the bottom of the penstock, the fast-moving water spins the blades of a turbine. The turbine is connected to a generator to produce electricity. The electricity is then transported via huge transmission lines to a local utility company. Head is how far the water drops. It is the distance from the highest level of the dammed water to the point where it goes through the power-producing turbine.
Flow is how much water moves through the system.
It's easier to build a hydro, plant where there is a natural waterfall. That's why the first hydro plant was built at Niagara Falls. Dams, which are artificial waterfalls, are the next best way. Dams are built on rivers where the terrain will produce an artificial lake or reservoir above the dam. Today there are about 80,000 dams in the United States, but only three percent have power-generating hydro plants.