وَالْمَاءُ الْمُسْتَعْمَلُ: كُلُّ مَاءٍ أُزِيلَ بِهِ حَدَثٌ، أَوِ اسْتُعْمِلَ فِي الْبَدَنِ عَلَى وَجْهِ الْقُرْبَةِ.
Meaning: Used water is any water with which ritual impurity was removed, or which was used upon the body in an act of devotion.
The definition has two parts: removing ritual impurity, and use on the body with devotional intent.
Certain applications of these two criteria are treated differently by Abu Hanifa and Abu Yusuf on the one hand and Muhammad on the other.