Circa 3000 BC, the craters of extinct volcanoes in Arabia were used as reservoirs by farmers for their irrigation water.

Dry climate and water scarcity in India led to early development of stepwells and other water resource management techniques, including the building of a reservoir at Girnar in 3000 BC. Artificial lakes dating to the 5th century BC have been found in ancient Greece. The artificial Bhojsagar lake in present-day Madhya Pradesh state of India, constructed in the 11th century, covered 650 square kilometres (250 sq mi).

The Kingdom of Kush invented the Hafir, a type of reservoir, during the Meroitic period. 800 ancient and modern hafirs have been registered in the Meroitic town of Butana. The Hafirs catch the water during rainy seasons in order to ensure water is available for several months during dry seasons to supply drinking water, irrigate fields and water cattle. The Great Reservoir near the Lion Temple in Musawwarat es-Sufra is a notable hafir in Kush.

In Sri Lanka, large reservoirs were created by ancient Sinhalese kings in order to store water for irrigation. The famous Sri Lankan king Parākramabāhu I of Sri Lanka said "Do not let a drop of water seep into the ocean without benefiting mankind." He created the reservoir named Parakrama Samudra ("sea of King Parakrama"). Vast artificial reservoirs were also built by various ancient kingdoms in Bengal, Assam, and Cambodia.

Many dammed river reservoirs and most bank-side reservoirs are used to provide the raw water feed to a water treatment plant which delivers drinking water through water mains. The reservoir does not merely hold water until it is needed: it can also be the first part of the water treatment process. The time the water is held before it is released is known as the retention time. This is a design feature that allows particles and silts to settle out, as well as time for natural biological treatment using algae, bacteria and zooplankton that naturally live in the water. However natural limnological processes in temperate climate lakes produce temperature stratification in the water, which tends to partition some elements such as manganese and phosphorus into deep, cold anoxic water during the summer months. In the autumn and winter the lake becomes fully mixed again. During drought conditions, it is sometimes necessary to draw down the cold bottom water, and the elevated levels of manganese in particular can cause problems in water treatment plants.
In 2005, about 25% of the world's 33,105 large dams (over 15 metres in height) were used for hydroelectricity. The U.S. produces 3% of its electricity from 80,000 dams of all sizes. An initiative is underway to retrofit more dams as a good use of existing infrastructure to provide many smaller communities with a reliable source of energy. A reservoir generating hydroelectricity includes turbines connected to the retained water body by large-diameter pipes. These generating sets may be at the base of the dam or some distance away. In a flat river valley a reservoir needs to be deep enough to create a head of water at the turbines; and if there are periods of drought the reservoir needs to hold enough water to average out the river's flow throughout the year(s). Run-of-the-river hydro in a steep valley with constant flow needs no reservoir.

Some reservoirs generating hydroelectricity use pumped recharge: a high-level reservoir is filled with water using high-performance electric pumps at times when electricity demand is low, and then uses this stored water to generate electricity by releasing the stored water into a low-level reservoir when electricity demand is high. Such systems are called pump-storage schemes.
Reservoirs can be used in a number of ways to control how water flows through downstream waterways:

Downstream water supply water may be released from an upland reservoir so that it can be abstracted for drinking water lower down the system, sometimes hundreds of miles further downstream. Irrigation water in an irrigation reservoir may be released into networks of canals for use in farmlands or secondary water systems. Irrigation may also be supported by reservoirs which maintain river flows, allowing water to be abstracted for irrigation lower down the river. Flood control al…

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Water falling as rain upstream of the reservoir, together with any groundwater emerging as springs, is stored in the reservoir. Any excess water can be spilled via a specifically designed spillway. Stored water may be piped by gravity for use as drinking water, to generate hydro-electricity or to maintain river flows to support downstream uses. Occasionally reservoirs can be managed to retain water during high rainfall events to prevent or reduce downstream flooding. Some reservoirs support several uses, and the operating rules may be complex.

Most modern reservoirs have a specially designed draw-off tower that can discharge water from the reservoir at different levels, both to access water as the water level falls, and to allow water of a specific quality to be discharged into the downstream river as "compensation water": the operators of many upland or in-river reservoirs have obligations to release water into the downstream river to maintain river quality, support fisheries, to maintain downstream industrial and recreational uses or for a range of other purposes. Such releases are known as compensation water.
The units used for measuring reservoir areas and volumes vary from country to country. In most of the world, reservoir areas are expressed in square kilometers; in the United States, acres are commonly used. For volume, either cubic meters or cubic kilometers are widely used, with acre-feet used in the US.

The capacity, volume, or storage of a reservoir is usually divided into distinguishable areas. Dead or inactive storage refers to water in a reservoir that cannot be drained by gravity through a dam's outlet works, spillway, or power plant intake and can only be pumped out. Dead storage allows sediments to settle, which improves water quality and also creates an area for fish during low levels. Active or live storage is the portion of the reservoir that can be used for flood control, power production, navigation, and downstream releases. In addition, a reservoir's "flood control capacity" is the amount of water it can regulate during flooding. The "surcharge capacity" is the capacity of the reservoir above the spillway crest that cannot be regulated.

In the United States, the water below the normal maximum level of a reservoir is called the "conservation pool".

In the United Kingdom, "top water level" describes the reservoir full state, while "fully drawn down" describes the minimum retained volume.
There is a wide variety of software for modelling reservoirs, from the specialist Dam Safety Program Management Tools (DSPMT) to the relatively simple WAFLEX, to integrated models like the Water Evaluation And Planning system (WEAP) that pl…

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