This refers to the mental attitude while facing an actual opponent. It refers to the need of making the mind calm, like that of an undisturbed body of water. Smooth water reflects accurately the image of all objects within its range, and if the mind is kept calm, comprehension of the opponents movements, both psychological and physical, will be both immediate and accurate, and one's responses, both defensive and offensive, will be appropriate and adequate. On the other hand, if the surface of the water is disturbed, the images it reflects will be on the other hand, if the surface of the water is disturbed, the images it reflects will be distorted. In other words, if the mind is preoccupied with thoughts of attack and defense it will not properly comprehend the opponent's intentions creating an opportunity for the opponent to attack.
Water can be quite destructive.
In fact, over time water is one of the most destructive forces on earth. Your mind must be like water. When necessary, be as destructive as you must.