PS..it's the old weber with the shallow pan
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The pan is there to act as a heat buffer and to even out any spikes from the coals. I have used both sand and water and to be honest I have not really noticed much difference in the end result between the two. For me I do find it works better than not having the pan there as it helps provide a more even and less variable heat.
The only time that I put anything in the water pan is when I am smoking in extremely unpleasant weather. Like below 30°f or if it's blowing 30+ mph. Then I will put sand in the pan and cover it with foil for easy clean up. In those crummy conditions the thermal mass helps. Water isn't a form of stable thermal mass. When you heat water the molecules can't hang on to each other and they fly apart forming a gad (steam) which causes evaporation. So you are loosing mass and you are creating a heating ans cooling cycle in the pit. By removing the water you are creating a more stable environment.
Like Wade said the pan by itself acts as a buffer or diffuser shielding the meat from direct heat. Quite often I remove the pan all together and don't use it all. I typically do this with poultry, pork loins and lean cuts of beef roasts. Things that normally benefit from a fast hot smoke, rather than a low and slow cook.
I am with b-one, my water pan is a foil lined drip catcher.
Most, but not all, do not use a water pan here.
Lots of previous questions on the subject: http://www.smokingmeatforums.com/newsearch?search=water+pan
I'm a no water kinda guy too.....Mine's full of sand. It does exactly what it's supposed to do......that is to act as a heat sink to even out the temps and hold them stable. Water is a huge hassle as far as I'm concerned.......very messy.
Replaced the water pan with a clay saucer in my 18.5, gives me more room to load up the ring with charcoal on longer cooks and I use less fuel than using water in a pan, I usually cook at 275 to 350 and running it dry makes it easy to run at those temps.