A refrigerant system grabs heat from the source with an evaporator coil. The coil allows the liquid or gas you wish to cool to pass over it, transferring its energy to the refrigerant gas inside the evaporator coil. The refrigerant is pumped to the condensing coil via a compressor. As the gas passes through the condensing coil, the heat from gas or liquid is then transferred to the outdoor air or a water supply.
An air cooled chiller uses the outdoor air as the medium to remove the heat. Because the outdoor air can get warm, the refrigerant needs to be compressed, raising its temperature above the outdoor air. This natural process allows the outdoor air to remove the heat from a source that may actually be cooler than it.
A water-cooled chiller is very similar to an air-cooled chiller. The only difference is that the heat is transferred to water instead of air. The condensing coil is submerged in moving water that is typically supplied by a well or public water system. Water is a more efficient medium to transfer the heat, so they are typically more energy efficient because the chiller doesn't need to work as hard. Conversely, the cost of water from a public water supply may offset the electrical savings.
Water and air cooled chillers have applications that span across almost all industrial and residential uses. Your refrigerator is an example of an air-cooled chiller that is used in everyday life. Water cooled chillers are more commonly used in industrial processes. The application is limitless because they can be used anytime that something needs to be cooled. One typical use is to cool beer between the process of boiling of the wort and fermentation.