Previous work
I looked around for existing code or libraries to do the fluid simulation for me. There are some, but most are either GPL-licensed or too expensive, so they are out of the question for a small-time independent developer like me. Some publications exist on the topic, most notably Jos Stam’s famous Real-Time Fluid Dynamics for Games from 2003. Mick West describes this algorithm in detail in his article Practical Fluid Dynamics. He provides a great overview of the basics, geared towards programmers. A somewhat more mathematical, but broader overview is in Michael Gourlay’s brilliant Gamasutra article Fluid Simulation for Video Games. He gives explanations of many techniques, their respective advantages and drawbacks. Many other interesting (academic) links are on the CFDtoy blog.