How is this determined?
When I make a map, if I add in water, it's always way higher than the default setting of the terrain.
So, I think if I change the base height when I make the map, that'll change it, but it didn't seem to do anything.
Is there any way to easily place water tiles and such without having to raise the height of the entire map manually or something?

(I hate terraining x.x)

If you go to Layer->Terrain, then click on add water, you can select a type of water to add. After you have done that, hit the "Edit Water" button below the choices, which will open up a dialog. Select the (Default) value from the list, and on the right, change the height to a suitable amount. You can also right click in the box that (Default) is in and add a new water state so you can switch between the two.

Thanks for that! Though, what use can the states really be on a per map basis? Changing the state changes all tiles.

Not sure about your question, but that might be of interest: http://www.staredit.net/250760/

It really depends. It can be useful to create some effects, like the lava rising in the one Starcraft 2 campaign map. (Lava and water use the same tiles, ironically.) Despite there being different types of water which all look different, it is very possible to create a new water tile with the same graphic as another in the Data Editor, so you can have 2 or more waters of the same type that are independently controllable from each other.

I had assumed that something of that sort would be used, but the states are just two radically different spots (or can be).
I'm assuming the water level was changed for that through triggers, but, how is it they made it rise at a fluid level? (as in smoothly)

(Again, I hate terraining. I prefer triggering, but you need a map first x.x)

You can switch between water states fluidly with the trigger "Environment - Set Water State", which will let you choose different line functions to blend the water states together, for instance, in changing from a state with low water level to high water level, we have:

Linear: Smooth curve, the water rises the same amount per second for the entire blend
Exponential: Starts slow, speeds up farther through the blend
Square Root: Starts fast, slows down father through the blend
Sine: I believe this is relatively cyclical, though I haven't tested it (IE, goes fast, normal, slow, normal, fast, normal, slow, etc).

I think that about covers it.

Thanks a lot shmeeps. You certainly seem to know your watering.