Water is only needed if you use a wet blade (usually just for wet tile saws). When cutting tile with an angle grinder I use a dry or a wet/dry blade. I would agree with taping with using painters tape and then drawing your cut line on the tape. It's hard to describe the technique, but to avoid chipping, I like to score the top of the tile once over (not cutting all the way through), cut through the tile from the side you aren't keeping, and then grind away the excess until you have a smooth edge on the good piece. It takes some practice but it is possible to cut with an angle grinder in a way that any chips that form from the through-cut are on the bottom side of the tile.