Visible crew/equipment: After Calvin Bouchard makes the announcement to tourists visiting the Undersea Kingdom to evacuate, we see the tour guide lead the crowd through the tunnels. The green screen backdrop is still in the final cut. They forgot to add in the underwater effect.
Factual error: When the shark swims towards the glass, it doesn't move its tail. Sharks have to swing their tail in order to swim. There is no way this shark could be moving.
Continuity mistake: When Dan walks down to a podium and looks over to see the dolphin knocking at the gate, the tee-shirt he is wearing changes from being plain white with a tag badge on his left, to a white shirt with a large blue stripe across it, with a tag badge being on the right. (00:08:20)
Continuity mistake: When two divers emerge from the water, one pulls their goggles up onto their forehead and the other pulls his goggles down to round his neck. Then the divers and Mike start talking about 'no overtime', and between shots the goggles around the divers neck vanish. (00:07:30)
Factual error: The window in the underwater control room has to be made from some thick material such as plexiglas to stand the pressure. Yet the shark simply lifts its snout a little and sends thin pieces of glass shattering everywhere.
Factual error: Sharks can't roar - they don't have vocal cords.
Factual error: When the shark is chasing Mike and his girlfriend near the end you can see air bubbles coming out of the fin (obviously a hole in the puppet). Real sharks do not blow bubbles from their fins.
Visible crew/equipment: When Mike fires the harpoon at the shark, the wire the arrow is attached to is visible. (00:45:05)
Revealing mistake: The shark attacks a little wooden platform in the water which 3 men then fall through. You can see this is made from a lightweight wood such as balsa so that it will break apart easily, and it's not the sort of wood such a thing should be made of.
Visible crew/equipment: In the opening credits we see shots of water skiers climbing on top of each other to try and form a human pyramid. In one long shot you can see the side of the wake which the crew's speedboat is making. (00:02:35)
Continuity mistake: In the beginning when the water skiers are practicing, in one shot they are skiing right next to land and trees, in the next shot they are way out in the ocean near the ports. (00:03:25)
Continuity mistake: When Mike answers the call from Calvin the phone cord goes over his shoulder. When it cuts it's gone. (00:27:10)
Factual error: At the end of the movie, the shark broke through the glass. When the entire room was flooded, the shark grabbed someone and started chewing them. Sharks don't chew their food. If their prey is too large to swallow whole, they rip it apart into smaller pieces.
Factual error: In the scene where they try to lure the shark, it eats that man. How is it possible to fit in a shark's mouth when only someone's leg did before? Also, if you look outside the shark's mouth, it isn't going anywhere, which is also impossible.
Continuity mistake: In the opening credits, there are eleven skiers in the pyramid. However when they fall in the water, and then all get up and ski off again, there are only ten skiers now. (00:02:00)
Other mistake: When Jaws breaks the glass in the control room, it shatters and flies everywhere, but the water doesn't even move or give any indication of flooding the compartment.
Factual error: The scene where the Shark is in the water/air circulation pump it swims backwards out of it. There is no way a shark could do that, it would drown.
Continuity mistake: When Mike has the harpoon pointed for the sharks dorsal fin, there is white rope wound around the length of the metal harpoon. In the shot just before he shots the harpoon, there isn't.
Continuity mistake: When the shark is chasing the water-skiers, you can see its fin is about 3 feet behind them, meaning its head must be underneath, if not in front of them. However, in the shot from under the water its viewpoint is shown as being behind them.
Revealing mistake: When the baby shark smashes into the gate, not only is it a dummy by the way it looks, but the head actually compresses back into the body on impact.
Answer: The lagoon was part of the theme park. Artificial with specific mammals inhabitants inside, warm and friendly.