The term “water white” when used in the context of a finish means a finish that is totally devoid of amber coloring in liquid form. The finish looks like water in the can.
In practice, the term is used to describe a type of lacquer, and sometimes a conversion varnish. But you should be aware that water-white doesn’t necessarily mean non-yellowing. It depends on the resins used in the finish. The only totally non-yellowing lacquer is CAB-acrylic. CAB is the acronym for cellulose acetate butyrate.
Water-white also doesn’t mean “white in the can.” Water-based finishes, which didn’t exist when the term was created, are white in the can (though clear on the wood), and these finishes don’t yellow as they age.