This site has everything you want and need to know about water dragons. http://www.icomm.ca/dragon/ I use reptile carpet for mine other suggestions are soil, newspaper, paper towel You don't want to use sand or wood chips. These guys can get impacted from them. When they eat their worms or crickets they stick their tongue out to nab them and could also be grabbing pieces of sand or bark with them. If you are thinking about getting a water dragon, I recommend looking into an austrailian water dragon. I have read that they are a hardier species. Much easier to keep alive. But water dragons are great, we love ours! Make sure you read the site I posted above before you go buy the little guy and set up his housing.
Good advise Stacy. I always prefered using soil because it helps to keep the humidity in the vivarium high and gives that female dragons a place to dig and lay their eggs. Tricia