It works along the same basic principles as a SolarTower; you have a large greenhouse at the bottom and a large chimney which channels the hot air upwards.
However, if instead of doing this over land, you put it over a lake, then you get a different result. Instead of just hot air travelling up the chimney, you get highly humid hot air moving up.
Now, imagine that you cover a lake with a floating greenhouse, and then place the chimney lying up the side of a handy nearby mountain. Once you get high enough, the water will start to condense out. If you have good materials, which are highly insulating for the lower part of the chimney, and conducting for the later parts you could control quite accurately the height at which this happenes. Effectively, what you have done is reproduce the WaterCycle at in microcosm. You can then channel the water back down the hill, generating Electricity all the way down, in a HydroElectricPlant. You also get distilled water out of this for free 1.
This whole system is likely to be less efficient that a normal SolarTower, so why bother? I think that it has one big advantage, however. With a normal SolarTower, you get Energy production all the time, whether you need it or not. With a WaterSolarTower, you can capture the elevated water into a resevoir, which you then empty whenever you like, most obviously at times of peak demand. This sort of technology is already in use for peak energy generation, but in this case, the water is normally pumped upward with off peak energy.
The thing that I haven't worked out with a WaterSolarTower yet, is what do you make the greenhouse from? You could use glass, but the whole structure is going to be a lot harder to build, as well as being fragile. Perhaps plastic stretched between pontoons would also work, but it's not very environmentally friendly.
Ideally, if there is a good, and strong material, you could even build the whole structure on the sea; instead of a mountain, the WaterSolarTower would have to be built up an old OilRig 3
1. Although, if you already have a lake and a mountain pure water is probably not going to be at a premium in the region so perhaps this is not a huge advantage 2
2. There again, if you are also near the sea, you could also use a OsmoticGenerator. You could even build a WaterSolarTower over the sea, rather than a fresh water lake.
3. If you are on an OilRig, then you are definately going to be near the sea, so an OsmoticGenerator seems a real possibility. It might even make up the lack of height compared to building up the side of a mountain.