Pink water is found below the entire game world. Whenever something happens to cause Jimmy to fall through the geography, he will land in the pink water. After a minute or two in real life time he will pass out and wake up at the nearest Medical Center.
Although frequently thought to be a glitch, the pink water is actually a counter-measure against glitches.
In the Wii version of Scholarship Edition, the water is the standard blue color, but still functions the same way.
The pink water can be viewed underneath the ocean inlet in Old Bullworth Vale if the camera dips below the surface of the ocean water.