Water is a found above land in many biomes such as swamp biomes, and desert biomes and tundra biomes and ice biomes. You can also break ice for water you can also go to a river or ocean.
Lava is underground around bedrock level so it just has to be dug around for. You can also check in ravines.
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When water meets a lava 'block', the lava is converted into an obsidian block. If water meets 'flowing' lava then the lava is turned into cobblestone.
Put a block of anything into the hole that the lava is coming out of and it will stop. Works with water falls also.
Obsidian is created whenever water flows on top of still lava.
Its a fluid block. you need mcpatcher to change water or lava.
You can find lava underground.