It certainly can be used as part of a progression to hone razors, and you can use it with water.
If you haven't got a dedicated lapping set-up. the cheapest way is to probably use wet and dry paper on a glass/marble/granite flat surface. drop a puddle of water on the surface, drop the paper (face up) on the puddle and drop another puddle of water on the paper surface, rub the hone on top. Progress through finer and finer sheets - 600 grit is fine to finish, but 325 is OK.
'Yellow Lake' was a brand, not a particular stone. The owners of the original mine got stones from other mine owners, so not every yellow lake comes from the Llyn Melynllyn site - some are coarser, some are finer. You will find it to be a mid-range or a pre-polisher, depending on type.
Regards,
Neil