This optical illusion known as a Fata Morgana makes strange shapes or a false wall of water appear above a watery horizon. When conditions are right, light reflecting off of cold water will be bent by an unusual layer of warm air above to arrive at the observer from several different angles. One hundred years ago, such a Fata Morgana mirage might have obscured real icebergs from the clear view of crew onboard the Titanic.
Additional evidence for this distortion hypothesis arises from the nearby vessel SS Californian which reported sightings consistent with Fata Morgana mirages. Read more about the SS Californian and the mystery of why she didn't come to the aid of the Titanic.
The above Fata Morgana mirage was taken off the US Pacific coast in 2008.
Look at this Fata Morgana in greater detail. The site also gives a very good explanation for the phenomenom.