A flood trap, like most traps, is triggered by a pressure plate. When stepped upon, water quickly rises from beneath the floor and begins to flood the nearby area. The shape and area that the water consumes varies but is typically about the size of an average room. The flood can occur in a nearby room or area, or directly on top of the trigger. The flood waters are deep, causing items in your inventory to float away, and can contain eels at the very least, so it's suggested that you escape to firmer ground as fast as you can. The water will recede after a few hundred turns.
Flood traps are typically more annoying than deadly and seem to be rather uncommon. A flood might separate you from your allies (who won't cross the deep water) or cause an important piece of your inventory to be lost temporarily. The eels only represent a significant threat if you can't handle them (quickly). Of course there's always the chance that other creatures that are at home in water will choose to submerge themselves in the flooded area.
Most of the info provided here requires further verification.