I wrap the waterpan of my WSM in foil, fill with sand, then put a final layer of heavy duty aluminum foil over the sand. There are a few reasons that some people use sand. One, it acts as a consistent heat sink.
The same reason that a freezer filled with food will stay cooler much better than an empty freezer, the extra mass will eventually catch up to whatever temperature it is exposed to and act as a "buffer". When the fuel temperature increases or decreases, the temperature at the cooking grate won't change as much due to this huge mass of sand (or water) that has a stable temperature.
The second reason is ease of clean up. You just peel off the top layer of foil covering the sand, throw it away, and replace it. A lot of people feel that most of the moisture in a smoker is released by the meat, and a pan filled with water does not contribute much to the equation.
Final reason is you don't have to worry about refilling the water pan. It's totally up to you though, if you like using water in the water pan there is no reason to stop.