What means by water on the side when serving whiskey?

It means exactly that: a glass of water on the side. Some people drink whiskey and water together, in the same glass, or whiskey with a few ice cubes (on the rocks). Other people prefer to have the water or the ice cubes on the side. I think the only reason for the water/ice is to slow down your drinking, so you don't get too drunk. It certainly does not make the whiskey taste any better.