As the above poster said, it is all below sea level; but the Marleybonians have built glass domes and pumped out the water so they can explore the Celestian ruins. Thus you see pumps/pipes all around and several quest involve fixing leaks or pumps.
Celestia is underwater because before, there was a war between the Celestians and Morganthe's minions. However, the Celestians were doomed, so they summoned the Storm Titan. It sank them though, but the Celestians raised domes to save their city. It was too late though! The Celestians have mostly died out.
The Marleybonians have pumped the water out, and everything is below the sea. Why are there only 3-4 areas that are able to swim? Probably because there are sea creatures that actually BREATHE water.
