Low rank coals are generally featured with a high water content which exerts strong influences onto their utilization including pyrolysis, gasification, liquefaction and combustion. Understanding of fundamental aspects of coal moisture and its effects on physical and chemical characteristics of coal and coal–water interaction are very important in order to develop technologies to remove coal water effectively. This paper provides a comprehensive overview on the fundamental understanding of water in brown coal and lignite, including the physical and chemical structure of coal, the forms of water present in low rank coals, migration of water during drying, coal structure changes during moisture loss, moisture re-adsorption, and effects of water removal on subsequent applications including combustion, gasification and liquefaction. Applications of techniques such as NMR, DSC and FTIR in determination and quantification of types of water and coal structures are also summarized