Guild Wars 2 - Underwater Combat Demo (PC)

Yes, there's underwater combat.  ANET was saying there's no "breath meter" because we breath in real life, so why should it be "real" in a game.  So when you jump into the water, you equip a SCUBA mask of sort.  If you take damage and you reach zero life, that is when you start to drown.  You just swim back to the top, regain your breath/life and away you go.
It also looks like each class will have their own type of underwater weapons.  Looks very interesting.