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 in-game Deep Water labeling, in which a small CGI clip showing someone being eaten by a shark off-screen is shown during the introduction sequence. A later revision of X-Perts was given a Deep Water sticker to cover up an erroneous claim about battery back-up saving, but does not allude to the label in-game.
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.