Using Pam on a Gas Grill

Piling the charcoal on one side gives you more control over your cooking -- because the grill isn't evenly hot, you can move the food around if its cooking too fast. In some cases, you specifically want the lower heat of indirect cooking, such as when dealing with roasts and other large cuts of meat.

The pan of water is often used when dealing with indirect cooking to reduce flare ups -- as the fat renders off, it lands in the water rather than the hot coals starting a grease fire and suddenly heating the item being grilled. As @deroberts points out, it also keeps the air moist, preventing the meat from drying out during the longer cooking period.

You always cover the grill to retain heat for indirect cooking; you're effectively creating an oven, so the item cooks evenly. Not covering the grill will mean your food won't cook evenly, if at al.

For thicker items (more than 2 inch / 5 cm thick), even if using direct cooking, you may wish to close the lid, rather than just cooking from the radiant heat of the coals. You will need to be careful, however, as it means you'll have to watch for smoke, as the fat renders off and falls into the coals. You should be prepared to open the lid to move the food should this happen, or keep a spray bottle of water to take down the flames.

If you're putting your wood chips directly on a fire, it's good to soak them (and that means real soaking--a few days--not an hour or two). This prevents the wood chips from actually catching fire, which can cause off flavors from combustion chemicals settling back on your food. Tastes kinda like a brand new telephone pole smells on a hot day. Tar/Creosote, and not a nice flavor.

But on a gas grill, if you've got your chips in a pan or wrapped in a fairly tight foil pouch, you needn't worry so much about the chips actually catching on fire. As long as they just smoulder, you're good to go.