From Sega Retro
Deep Water was a concept invented by Sega of America during the mid-1990s, used to identify video games intended for more mature audiences released on Sega platforms. It is part of Sega's long history of self regulation (which continues in Japan to this day), though was a label very rarely seen and is therefore not widely remembered (at least in comparison to the Videogame Rating Council).
Only the Sega Mega CD game Eternal Champions: Challenge from the Dark Side and the Sega Saturn port of Duke Nukem 3D are known to have Deep Water labeling. A small CGI clip showing someone being eaten by a shark off-screen was shown at the beginning of both games.
Due to its lack of use, the Deep Water name is often mistaken for companies involved in the game's development. It may have been a way for Sega to distance themselves from possible controversy, or more than likely, poor planning on behalf of the company, as the ESRB system proved to be more than capable of identifying products intended for older audiences.