There are two water wheels to turn in order to bring on the water.
For the first wheel Jump down into the shallow water and head to the other end smiting crabs as you go. You should see some green platforms at the end with an armored Gnorc standing a bit back, head up there. Kill all the Gnorcs and things down this path, and then as you reach a large waterwheel, go over to the left-hand side. Get up to the highest point of the wall and then jump onto one of the poles sticking out of the waterwheel, if you have the Tail Spin ability you'll attach to it. Jump forwards to the other pole, this will turn the wheel and so turn you, repeat this process as many times as you can as quickly as you can. There's no need to wait for you to stop moving, you can jump as it's still going backwards in order to speed up the process. Once the red bar reaches full, the water outside will rise up half-way.
As for the second wheel, head out of the pool and and go straight ahead through a hole in a small tower. You'll come out of the short tunnel in an area with Moneybag's shop with Blink standing behind it. Head along the left bridge, be careful about the archers. Once across take the bridge to your right to find the water wheel. To activate it jump onto the platform on the right side. Once you get things moving keep the wheel going to fill up the pool.