Similar to atmospheric propagation, the propagation of light underwater is affected by absorption and scattering. However, the scale of absorption and scattering in the underwater environment is much shorter, with extinction coefficients given in inverse meters rather than inverse kilometers. Such severe attenuation of light poses many challenges to optical imaging and free space optical communications in water. Although blue-green wavelengths can be selected to minimize absorption, multiple small angle forward scattering produces extended beam profiles that cannot be described by simple Gaussian shapes. This spatial spreading leads to image blurring and pulse stretching, which can limit the information capacity of underwater optical communication links. Scatter of the beam in the backward direction can also reduce the contrast of underwater imaging systems and modulating retroreflector-type communications links. Results from laboratory tank experiments and performance prediction models will be presented to illustrate the effects of the underwater environment on a propagating optical signal and on free space optical communication links.