Well here is my favorite way how to do it:
I simply use Toilett paper and wall paper glue! I put a layer of the paper to the base soak it with the glue and add layer after layer until the desired height of it. to form waves I simply push the still wet paper with my fingers (pretty messy) or with a brush to the according form. After the whole things is rock hard I color the paper with all kind of colors. At the end I give ´em a coat of Future... Thats it, simple, effective and very very cheap and most of all realistic , take a look at one of my models at www.modelwarships.com (Japanese Kaibokan being attacked by a PBJ1-d (B-25)
If there are anymore questions about this technique let me know.
Keep on modeling
René