Water can't penetrate something that's waterproof. Umbrellas and rain boots don't work very well if they're not waterproof.
Waterproof jackets will keep you dry even if it starts to rain, and waterproof mascara won't run in black streaks down your face even if you're weeping at a sad movie. You can use this word as a verb, too: "We should waterproof the tent before we go camping this weekend — it's supposed to pour!" If you're British, you might also use waterproof as a noun, to mean a waterproof rain coat.