In the past few years modelers have come up with all sorts of ways to immitate water. The standard in the magazines these days is much higher than it used to be.
Lots of techniques seem to work for different folks. I've tried several (by no means all) of them, and the one I personally like best is a pretty old-fashioned one.
I start with a piece of wood (poplar works nicely - and is available at Lowe's stores) about half an inch thick. I draw a series of lines across it, about two inches apart, to establish a vague pattern to the wave formations, and draw the outline of the ship's hull where I want it to be. (I like to pose the model at a slight angle to the baseboard's centerline, with a little more space ahead of the model than aft of it.) Then I start working over the surface of the board with a sharp, spoon-shaped gouge, making a series of irregular, dish-shaped cuts just as shallow as I can make them. (On 1/700 scale even the most shallow depression becomes a pretty big wave.) I'm most comfortable modeling ships that are dead in the water. (Among other advantages, that eliminates the problem of funnel smoke.) If I'm trying to show the ship under way, though, I add the bow wave and wake with white Milliput. (It's a big help to have some photos of the ship under way, to help with the formation of the bow wave and wake. Some ships, at some speeds, produce more complicated wave patterns than others.)
With the "sea" carved, the next step is to apply a primer to seal the wood grain. (That's the big advantage of poplar over basswood: poplar has a really fine grain that's easy to fill.) Either latex primer from the paint store or gesso from the art supply store will work. One thing I learned the hard way: prime both the top and the bottom. If you leave the bottom unprimed, the wood will warp hideously as it dries.
For painting the "sea" I like artist's acrylics. They seem to have much more depth and brightness than model paints - especially when mixed with gloss acrylic medium. Here's an area of model building where personal taste can run amok. The sea assumes just about every conceivable color, from light green to purplish black, depending on the depth of the water, the weather conditions, and the light. Take your pick. When the paint's dry, give it a couple of coats of acrylic varnish (from the art department again). The contrast between the high gloss of the "water" and the flat paint on the ship will be really striking - and realistic.
Like I said, that's only one of many ways to do water. I'll probably try something different next time, but so far the carved wood approach has given me the happiest results.
Hope this helps. Good luck.