It does just what it says it does: its a gloss enhancing polish. It won't remove defects by hand. HOWEVER, it can remove defects by machine, as its a "pure polish" and any "cut" you get from it will be pad dependent.
In other words, the pad itself has some "cut". So, I've seen this product take take away some medium duty swirls with a orange LC CCS pad. As that pad is somewhat aggressive. Keep in mind its just as much what your using to polish with, as the polish.
That being said, if you used this product via machine with a medium / heavy polishing pad, I would bet my last $ it would take care of any water spots that aren't etched into the paint just from the mechanical cut of the pad.
Also, it leaves behind a glaze that can mask some defects and leave a glossy surface. The product also contains kaolin clay - which is a "filler", but may have some light abrasive properties as well.
Its a versatile product. I like it.