A little history:

My first attempt used a float, potentiometer, a simple FM encoder, a handheld digital audio recorder, and some software. It worked pretty well on waves in a pool. Its range of motion was too limited, and the resolution was too poor to produce good audio.

The original version uses a 555 as a variable frequency oscillator. The frequency is controlled by a potentiometer with an arm attached to the shaft that supports a styrofoam float. As the water level moves up and down, the frequency continually shifts. The 555 output is recorded on a digital audio recorder. I wrote some c code that analyzes the recording and produces an audio file. A recording of about 30 minutes of water waves produces about 20 seconds of sound. It sounds kind of echo-ey, but with very poor resolution (like 5 or 6 bits), only just good enough to motivate me to improve the sound quality. (listen to the sound sample)