I recently posted a short description of my sharpening method over at Madcap Woodwright, but without a picture. I do have oil stones and water stones, but avoid them if possible because the oil or water, along with the black steel left on the stones gets all over me and the work. The very accomplished woodworker at Ishitani Woodworking has his water stones on a tray bridging a sink under a faucet and over a drain (starting at 9 min. into the video). This looks like an excellent way to clean the stones after use, and generally keep the mess under control.
I probably will install a utility sink in my basement shop at some point, and follow suit. Until then, here is my sharpening set-up.
I just use two diamond blocks. A 30 year old coarse interrupted one, and a newer continuous 1200 grit. Both DMT brand. I use cheap window cleaner to wet them. I clamp my 4×24 portable belt sander in the front vise and hollow grind (if needed) on the front wheel with a 60 or 80 grit belt.