From the Sauer documentation:
"waterlod N
Sets the precision level of the water LOD (Level of Detail) from 0..3, where 0 is the lowest and 3 is the highest setting (default: 1)."
Reading instructions is boring, right?

meister, its a good thing to know that im not the only one the reads the documentation. I feel alot better about myself now xP

Try setting it from 0 to 3 and backing up far away, then flying up close to some water in edit mode, with wireframe turned on. You will see.

LOD means Level of Detail... I'll try to explain simply :
The longer you are from the waves, the less detail they have. If you have /waterlod 3, they will still have a high detail at almost any distance, compared to 0. Default is 1.

watersubdiv defines the shape of the waves. Lower values equal jagged waves like spikes and an extreme drop in the fps rate. Higher values equal smoother waves and the the best frames possible.

waterlod defines the randomness of the waves. Lower values means the waves are hardly seen and have the best increase in fps. Higher values means more random waves when it comes to height, width and length, thus a small fps drop.

Windecker: that's what I said. ;)