Water skin

Water skins are pouches used by Waterbenders in cases where water is scarce or unavailable. Standard water skins, such as the one frequently used by Katara, can contain half a gallon of water, though there are pouches much larger in size that hold relatively larger quantities.

Battle
Water skins are advantageous to have in duels or large scale battles, as they provide Waterbenders with a constant source of bendable substances to work with. When several are used in concurrence, they can provide tremendous amounts of water, making up for the lack of bodies of water in a given environment.

As a prominent user of these pouches, Katara demonstrates in many occasions the importance of a water skin. For instance, while in the Fire Nation-occupied stronghold of Omashu, Katara was able to effectively defend herself against Mai and Ty Lee due to having a supply of water readily available from her pouch.

Also, during Team Avatar's attempt to break into the Earth Kingdom Royal Palace, Katara used water from her water skin to create an ice slope that elevated her, allowing the creation of a much grander water whip with the water from the moat. With only the water from her pouch and the amount available within the vicinity of the palace, Katara was able to defeat several units of Royal Earthbender Guards.

During the Invasion of the Fire Nation, Katara used three larger water pouches to compensate for the lack of water in the Fire Nation Capital. With these pouches, she was able to snap the chains of a ballista and defend herself against the attacks of Imperial Firebenders, among other things.

Healing
In cases where healing is necessary, it is advantageous to have a water skin, as a body of water will not always be present when someone is injured. Water skins allow Waterbenders to work on the wounds acquired during a battle as soon as they happen. This makes it more likely that the injury will heal at a faster rate, rather than worsen if left untreated for a period of time.

While seeking Appa under the waters of Lake Laogai, Katara was able to work on a wounded Jet after he was struck by a fatal Earthbending attack by Long Feng. Albeit unsuccessful, there would have been no other indication of Jet's present state of being if healing did not occur.

In a similar case that occurred during the Day of Black Sun, Hakoda was effectively treated by Katara, as she had a source of water readily available from the three water pouches she carried. Although Hakoda was not healed completely, he improved to the point where he was able to march to the Fire Nation Capital with some assistance of Katara.

And lastly, in what could have been a life or death situationion, Katara was able to heal an injured Zuko after lightning failed to exit his body when he attempted to redirect a lightning attack generated by Azula. Katara was able to work on Zuko following Azula's defeat under her hands, and as a result, Zuko improved markedly and was in good enough condition to be crowned Fire Lord not too soon after the Comet Enhanced Agni Kai with his sister.

Other Purposes
The presence of water skins in arid conditions where there is a limited supply of water can be quite advantageous. While traveling through the harsh Si Wong Desert, for example, Team Avatar was able to survive, albeit barely, with the water available in Katara's water skin.

Water skins can also be beneficial in missions of sabotage or infiltration, as evidenced when Team Avatar penetrated the Fire Nation Drill headed for Ba Sing Se, in an attempt to dismantle the machine by targeting its interior frame. As the drill was mostly metal both externally and internally, the water skin provided Aang and Katara a source from which to bend.Working together, they utilized the water to slice the metal beams within the mechanism, weakening its frame.

Later on, Aang used water from the skin to carve a target onto the drill's center-most point, where he later used a combination of Airbending and Earthbending to accumulate enough momentum render the drill inoperable.