Hydroelectricity is electricity generated by hydropower, i.e., the production of power through use of the gravitational force of falling or flowing water. It is the most widely used form of renewable energy. Once a hydroelectric complex is constructed, the project produces no direct waste, and has a considerably lower output level of the greenhouse gas carbon dioxide (CO2) than fossil fuel powered energy plants. Worldwide, an installed capacity of 777 GWe supplied 2998 TWh of hydroelectricity in 2006.[1] This was approximately 20% of the world's electricity, and accounted for about 88% of electricity from renewable sources.[2

How does hydroelectric power work? Water is needed to run a hydroelectric power-generating unit. The water is held behind a dam, forming an artificial lake, or reservoir. The force of the water being released from the reservoir through the dam spins the blades of a giant turbine. The turbine is connected to the generator that makes electricity as it spins. After passing through the turbine, the water flows back into the river on the other side of the dam.

Source: http://www.tvakids.com/electricity/hydro.htm