Ahead of time fill a TON of water-balloons (at least half a garbage can full). This can be pretty tedious so try and get lots of help.
At game time divide the group into teams (divide a smaller group in half, or a larger group into thirds, etc.). Each person gets two water-balloons and each team gets one flag. If members of the opposing team cross the dividing line and a balloon breaks on them (either thrown or popped on them) they are out until the next round. Game play continues until one team captures the other's flag. A large grassy field is the best terrain. You can also speed the game up by adding a time limit, or limiting people to one balloon. It's a BLAST! to play, and usually turns into a giant water fight afterward.