In recent years, natural phenomena simulation attracts a spurt of research attention and interest in computer graphics and virtual reality domain. How to obtain realistic natural phenomena by simulation in an efficient way is the main purpose of this research field. This paper summarizes the main research achievements on the topic of liquid simulation. A real-time liquid simulation method based on semi-Lagrangian is proposed for liquid simulation, followed by a surface reconstruction method using simulated results. In this approach, Navier-Stokes equations are first discretized in both spatial and temporal dimensions. Second, by solving the constructed Poisson equation, numerical solution for each time step is obtained. Third, particle movements are accurately driven by the solved velocity field in order to simulate the dynamics of water. By applying surface tracking and Marching Cubes algorithm, water surface is finally extracted. Experimental results show that the simulation speed of this method is high enough for real time use. Satisfactory visual effect is also obtained, facilitating the usage of this application in computer games, movie making and virtual simulation in medical area.