The fundamental importance of water molecules at drug-protein interfaces is now widely recognised and a significant feature in structure-based drug design. Experimental methods for analysing the role of water in drug binding have many challenges, including the accurate location of bound water molecules in crystal structures, and problems in resolving specific water contributions to binding thermodynamics. Computational analyses of binding site water molecules provide an alternative, and in principle complete, structural and thermodynamic picture, and their use is now commonplace in the pharmaceutical industry. In this review, we describe the computational methodologies that are available and discuss their strengths and weaknesses. Additionally, we provide a critical analysis of the experimental data used to validate the methods, regarding the type and quality of experimental structural data. We also discuss some of the fundamental difficulties of each method and suggest directions for future study.