Vaporeon underwent a spontaneous mutation and grew fins and gills that allow them to live underwater. They have the ability to freely control water.
(From  Bulbapedia) Vaporeon is a composite creature sharing physical traits of aquatic and land animals. It is a quadruped with three small toes on each foot and dark blue paw pads on the hind feet. Vaporeon's body is light blue with dark blue marking around its head and a ridge down its back. This Pokémon has a split tailfin that has been mistaken for a mermaid's in the past. It has a white ruff around its neck, and three fins around its head made of cream-colored webbing. It is said that rain will come within a few hours if Vaporeon's fins begin to vibrate.
Vaporeon is mostly found in urban settings and is rarely seen in the wild, but it can also be found near clean, fresh lakes. It has evolved to become better suited to an aquatic lifestyle. In addition to developing gills, it has a cell composition similar to water molecules. This structure allows Vaporeon to melt into water at will and keeps it camouflaged as it swims.
(From Bulbapedia) Vaporeon's origins are uncertain, though it could be based on a cross between aquatic creatures, felines, and canids. The fins and dorsal lining may be based on different types of tropical fish. Its ears resemble a mix between a fish's fin and a fennec fox's or caracal's ears. It also shares characteristics with mermaids. Vaporeon may also be inspired by the Telchines of Greek mythology, or the Merlion, a national symbol of Singapore. Its ability to become invisible and turn into water might be inspired by the Asrai. Vaporeon's resemblance to both carnivorans and cetaceans could be based on primitive whales, such as Kutchicetus. Its fringe around its neck resembles a ruff.
(From Bulbapedia) Vaporeon is a combination of vapor (a gaseous form of water) and eon (an immeasurably long period of time, possibly referring to how long evolution takes naturally). Eon is a suffix all Eevee evolutions share and was Eevee's English prototype name.