The best way to imagine a water worm is to imagine this:
1) a rubber donut that's filled with a liquid of some sort
2) stretch the donut such that it becomes more like a cylindrical tube
3) the tube is capable of flipping inside out, since well....its a hollow tube with water....
4) the thing fits in your palm, and flips itself inside out really easily if you try to squeeze it, making it easy to lose a grip on. You can also flip it inside out over your finger.
Man....for such an innocent contraption, the description made me feel dirty.