Yes, it is indeed a hydration tube (big straw!). The watertight fitting, located just off to the side of the aft coaming, is out of the way for paddle float entries and does not interfere with the sprayskirt. The tube is simply pulled up when thirsty and pushed back down into the deck when done. The bladder rests on the bottom of the hull and is secured with bungees to prevent movement in the event of a roll etc. In this case the bladder is in the day hatch compartment, but can be placed in the rear compartment or behind the seat as well.
This "watering" arrangement has a couple of advantages:
1. Reduces deck clutter - no more water bottles under the deck bungees.
2. Lowers the center of gravity by placing the weight on the bottom of the hull rather than on your back (if you use a backpack type bladder)or on the deck.
3. Allows access to your water without popping the sprayskirt (applicable to those who carry their water bottle in the cockpit).
4. Can be used as a "cockpit outlet" when needed - just kidding of course!

Joe