Dual
In the same manner that scores were settled with a dual back in the old days, you can hold a water gun dual. Instruct two people to stand back to back, and instruct them to take 10 paces forward. At the sound of a whistle or when the word "dual" is spoken, the two players must turn and fire at each other. The first player hit is the loser. You can make this into a tournament style game if you have a lot of players. Simply pair everybody up. With each round, the winners advance until there is only one dual winner left.
Water Balloon Dodge Ball
This game is good for a large gathering, such as a neighborhood party or family reunion. Split into two equal teams. Each team should fill 20 to 30 water balloons. Outline a playing field with a line in the middle that the members of the team cannot cross. (You can use a rope or physically draw a line in the dirt.) The game is played like traditional dodge ball. If you throw the water balloon and it hits someone and explodes they are out. If they happen to catch the water balloon without it exploding, you are out. Play until one team has been completely eliminated.
Water Balloon Sling Shot
Purchase a water balloon sling shot at your local party store. Divide the players into two equal teams. Fill about a dozen water balloons. The teams then take turns trying to launch their water balloon the farthest with the sling shot. The team that launches the balloon the farthest is the winner. As a reward, they get a "free throw" at each player on the other team. They can either throw a water balloon at them, or douse them with a water gun for five seconds.
Water Sponges
If you don't happen to have water guns or balloons on hand, you can substitute sponges as your water weapon of choice. Fill a large bucket with water. Soak a few packages of sponges, and fire away at your friends. To keep them logged with water, don't ring them out before you throw. However, if you want the sponge to travel a little further, ring out some of the water before firing.