Fallout 3 Tweak Guide
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Water Refractions: Refraction occurs when rays of light are bent. This gives objects which are seen through water a shimmery and distorted appearance. As the screenshot comparison above shows, when this option is ticked, looking up while under water will result in being able to see wavy, distorted buildings; when the option is unticked, you can't see anything beyond the rippling surface of the water. Disabling water refractions can improve FPS in water areas, however it also makes things much less realistic and much more disorientating when under water for example.
Water Reflections: Water reflections show mirror images of nearby objects on the surface of bodies of water. If this option is ticked, such reflections are shown - with the quality of the reflection determined by a combination of the Reflection Quality, Soft Reflections, Full Scene Reflections and Full Detail Reflection settings below. If unticked, all reflections are removed from the surface of water as shown in the final 'Off' screenshot in the comparison above - this will noticeably improve FPS around water areas at the cost of realism. If Water Reflections is disabled (unticked), all reflection-related settings as noted above will also become greyed out as they will no longer have any effect.