"Water seeks its own level" means that everything will seek its own equilibrium state. When conditions are unstable, changes and readjustments will occur until a state of stability is reached. Dmitri Mendeleev, a Russian chemist, says: "There exists everywhere a medium in things, determined by equilibrium."
"Water seeks its own level" is different from "birds of the same feather flock together", i.e. where people tend to associate with people of the same frequency or social status.