In my opinion, a ship is the best investment a player can make after a wagon. It gives you a place to rest, a place to store things, a place to go to when you need to get out of town, a place to experiment with spells and whatnot where you dont have to worry about killing innocent civilians (not that I've ever been able to blast a townie with a spell) and it eliminates the extra cost when you need to travel by ship. Fast travel will now take the shortest time and you only pay for inns along the way. As soon as you have the money, buy one.
You may only buy ships in seaports (and in capital cities?). If you try to buy one in an inland town, you will be refused and told to go to a seaport.
There are two kinds. The large one (having two upper decks, a lot of rooms in the lower deck and a large open hold - cost is 200,000 GP) and the small one (having one upper deck, one lower deck with 5 compartments and a large open hold - cost is 100,000). Both work the same. Its all a matter of your personal taste, needs and finances.
It is very easy to fall into the void from inside the cargo hold of your ship, so exercise caution when moving around in that area.
Items stored on your ship remain after you leave. In the original version of the game you could not rest on your ship, this has since been fixed. When engaged in combat on your ship, follow the same rules you would in town - no kicking doors or walls and no picking pockets. Both actions will bring guards down on you (I guess they patrol in invisible rowboats).
When you are on your ship you are not on the game map (actually, you are, but you're in the far northwest corner and it won't show on the Bay map). If you start swimming youll might hit land eventually, but be prepared to be really bored. On the upper deck(s) you are considered to be in the wilderness, though not generally subject to random monster encounters. Below decks you are considered to be in your house or a room at an inn and can rest safely.
You may only own one ship at a time. Sorry, no shipping magnates allowed in the game. If you wish, you may sell your ship back to the bank, but you will lose all items which are stored on it. If you have items you want to keep, transfer them to your wagon, your house or your room at the inn (make sure the rooms paid up or youll lose everything the next time you leave town).