Drywall is a common component in modern homes used to create a flat facade between rooms. As its name implies, drywall needs to stay dry as moisture results in warping and rot. If drywall gets wet, replacement is often necessary. Since it is not load-bearing, removing and installing new drywall will not threaten the integrity of your home.
A splash of water from a glass won't typically destroy drywall. The same can be true of a small leak if it's caught soon enough. When this happens, immediately stop the flow of water, and proceed to dry the drywall with towels. Place a fan nearby, and direct the airflow across the affected region. If you're prompt, you can dry it out before it gets permanently damaged. In the process, it might become discolored, though you can remedy this with white paint. If it begins to sag or warp, you're better off cutting the affected region from your wall and installing a new sheet of drywall.
If the drywall is exposed to a large amount of water over an extended period, it will become irreparably ruined. A steady leak or flood damage are common examples. Even after it dries, the drywall will not return to its original shape. Instead it will be clearly warped and discolored. Applying firm pressure will cause it to crumble into a dense, chalky powder. Remove the drywall promptly, dry the surroundings and then install a new sheet. Moisture-damaged drywall is not simply an eyesore, but it's also a health hazard.
With a little bit of water, drywall can become an ideal environment for mold. Even after drying it out, if mold has taken root, it will persist. In mild cases, the mold will cause discoloration and an unpleasant smell. In extreme cases, such as with black mold, it can negatively affect the health of those nearby. Symptoms include red and irritated eyes, sneezing, headaches and a host of respiratory problems. If drywall shows signs of mold infestation, remove it immediately.
Some manufacturers treat their drywall with a water-resistant coating. These sheets of drywall are readily identified by their green coloration. Although they are not truly waterproof, they do provide additional protection. They're ideal for bathrooms, especially near showers and bathtubs. They cannot hold up against long-term water damage, though, and they're as susceptible to floods and leaks as typical drywall.