Here's a couple pics for ya
1. Short ram intake
As you can see, the air filter is in the engine bay and gets trapped with the extremely hot air. So all that it can suck in is hot air.
2. Cold air intake
On this one, the air filter is down below the engine bay and when you're driving all the outside cold air gets forced into the filter. So this way it sucks in lots of cold air, hence the name.
The reason why cold air is better for your engine is because it's denser which means that you can get more of it into your engine. The more air, the better.
Oh, and about the topic of sucking up water and killing your motor. Normal mud puddles won't hurt your motor, your intake won't suck up enough water from merely getting splashed with water. And there's a cheap little piece to add to your intake. If you look at the pic of mine you will see a black peice half way up the pipe, that's a by-pass filter. So if by chance you suck up any water, this part will catch it before it enters your motor.