Re the holding water theory. There's no doubt that, in the very old days, greens were put in hollows to help retain moisture. But we are talking about the VERY old days, i.e. pre 1900, and mostly on the linksland, where obviously there would be a significant problem with keeping greens in condition during a drought. That was one of the reasons that Colt became so busy early in his career; he was busy removing a lot of greens from punchbowls, and he wrote a lot about it.
Tom B -- you would be surprised. By the early years of the 20th century courses were building pipe infrastructures to enable artificial watering of greens. Obviously we aren't talking automated irrigation, but there would be a supply and a guy from the greens crew would attach a hose and water the green. By 1912, when he wrote in Sutton's 'The Book of the Links' Colt was advocating that all greens should have water laid on.
BUT
Equally there is no doubt that greens were being built much later using construction methods whose only purpose really seems to be to retain water. On lots of 1910s, 1920s UK courses there are so-called 'dew pond' greens. And the latest I have come across is 1939. When Alison built Royal Hague in that year, the greens were built with a clay layer. The problems with this layer were the spur to Frank Pont's project to rebuild RH's greens about ten years ago. Was that clay there to retain water? I haven't heard it specifically stated but am struggling to think what else it could be for.