means A critical turning point that marks a decisive change in direction or outcome — or, literally, the high ground dividing the drainage of two river systems.

from A plain compound of 'water' and 'shed,' where 'shed' carries an older sense of 'to divide or separate' (related to the verb behind 'shed skin' and to German 'scheiden,' to part). The word arrived in English in the early 19th century, likely modeled on the German 'Wasserscheide,' literally 'water-divide' — the ridge line that sends rain rolling down opposite slopes. The figurative 'turning point' sense came later, once people noticed how neatly that ridge captures a moment of no return.