UTMC

I'm sure this is some perspective/optical illusion, but still...

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--Jaeger

I'm waving the CGI flag here...
Watch the way the water moves from :39 to :53'ish. It skips... it doesn't move properly. Then as it continues the water doesn't move the way it should along the walls if you look carefully.

Actually, I think that indicates that it's not cgi, because why would you intentionally animate the water that way if you were trying to look convincing? In fact, making the water flow the way it does in the video would be more effort to rig than more natural flowing water.
The model's real geometry isn't what you see so the water on it doesn't appear to behave correctly. Here is a (low quality, non embeddable) video of another realization of Escher's waterfall that shows it from a different angle, which shows how it might have been done: http://www.milkandcookies.com/link/44839/detail/

I don't know how he did it, but if I wanted to do that, I would build it as seen, and put sheets of clear plastic mounted 1/16" above water surface with a battery operated pump in the box below the wheel.

pour in water, water fills box area with pump, pump pumps water between wood and clear (invisible) plastic up to the top and down over the wheel.

I think this would account for the oddness of the water movement.

So, there!

For some reason I was expecting this-

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