With a view toward a better molecular level understanding of the effects of hydrogen bonding on the ultraviolet absorption spectrum of liquid water, benchmark electronic structure calculations using high level wave function based methods and systematically enlarged basis sets are reported for excitation energies and oscillator strengths of valence excited states in the equilibrium water monomer and dimer and in a selection of liquid-like dimer structures. Analysis of the electron density redistribution associated with the two lowest valence excitations of the water dimer shows that these are usually localized on one or the other monomer, although valence hole delocalization can occur for certain relative orientations of the water molecules. The lowest excited state is mostly associated with the hydrogen bond donor and the significantly higher energy second excited state mostly with the acceptor. The magnitude of the lowest excitation energies is strongly dependent on where the valence hole is created, and only to a lesser degree on the perturbation of the excited electron density distribution by the neighboring water molecule. These results suggest that the lowest excitation energies in clusters and liquid water can be associated with broken acceptor hydrogen bonds, which provide energetically favorable locations for the formation of a valence hole. Higher valence excited states of the dimer typically involve delocalization of the valence hole and/or delocalization of the excited electron and/or charge transfer. Two of the higher valence excited states that involve delocalized valence holes always have particularly large oscillator strengths. Due to the pervasive delocalization and charge transfer, it is suggested that most condensed phase water valence excitations intimately involve more than one water molecule and, as a consequence, will not be adequately described by models based on perturbation of free water monomer states. The benchmark calculations are further used to evaluate a series of representative semilocal, global hybrid, and range separated hybrid functionals used in efficient time-dependent density functional methods. It is shown that such an evaluation is only meaningful when comparison is made at or near the complete basis set limit of the wave function based reference method. A functional is found that quantitatively describes the two lowest excitations of water dimer and also provides a semiquantitative description of the higher energy valence excited states. This functional is recommended for use in further studies on the absorption spectrum of large water clusters and of condensed phase water.