Water is pretty decent at absorbing the light and particles radioactive things emit. This prevents that light and those particles from reaching something that’s alive and damaging it.
I don’t know what you mean by “and not everything else outright.” Water just has chemical properties that make it good at absorbing high energy light.
As for how radiation can still damage us if we’re mostly made of water, it’s simply because we’re not surrounded by an olympic sized swimming pool of water. You need a lot of water to meaningfully block radiation. The tiny amount of water on your skin or in your cells isn’t going to protect the proteins and other complicated molecules in them from getting hit by radiation.
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