Notice the difference in various translations:

(King James Version) 1 John 5:7,8: “For there are three that bear record in heaven, the Father, the Word, and the Holy Ghost: and these three are one. 8 And there are three that bear witness in earth, the Spirit, and the water, and the blood: and these three agree in one.”

(New American Standard Version) 1 John 5:7,8: “7 For there are three that testify: 8 the Spirit and the water and the blood; and the three are in agreement.”

Why the difference? The middle parts of verses 7-8 are considered spurious by most modern Bible scholars, thought to be added much later based on wording found in the oldest manuscripts. 

In 1 John 5, the Apostle John is proving Jesus is the Christ, the son of God. 

The spirit, the water and the blood are three things which testify to this fact.  We cannot rely on the testimonies of corrupt men to prove who Jesus is, so John chose three things from God to be a witness of Jesus’ true identity. In this verse, John is pointing out that all of them say the same thing, “…and these three agree.”  

The order in which John listed these is chronological. At his baptism, Jesus received the holy spirit, God’s power and influence. The water was relevant during his ministry, and the blood came at the end of his life when Jesus sacrificed everything on the cross. Let’s look specifically at each one.

The spirit: God’s holy spirit that fell like a dove upon Jesus at his baptism (Matthew 3:16-17). From that point on, Jesus used the power from the holy spirit to perform miracles and proclaim God’s message. The descending of the holy spirit at his baptism marked the beginning of Jesus’ ministry.

The water: Not literal water in this case. In Scripture, water represents truth as a cleansing agent, specifically one that can bring salvation by cleansing our sins. Consider the following verses for how Jesus’ words brought this living water to the world during his ministry:

Isaiah 12:3: “…with joy shall ye draw water out of the wells of salvation.”

John 4:9-14: “…Jesus answered and said unto her, Whosoever drinketh of the water that I shall give him shall never thirst, but the water that I shall give him shall be in him a well of water springing up into everlasting life.”

John 7:37-39: “…if any man thirst, let him come unto me, and drink.”

John 15:3: “Now ye are clean through the word which I have spoken unto you.”

These scriptures show “water” represents the words Jesus spoke during his time here on earth.

The blood: The blood here refers to Jesus’ sacrifice on the cross. He gave his life as a ransom for mankind in order to pay for our sins. Hebrews 9:22 tells us that “without the shedding of blood, there is no remission of sins.” 

1 John 1:7 supports this with “the blood of Jesus cleanses us from all sin.”

The Apostle John chose the spirit, the water and the blood as three iconic properties to prove, from a heavenly standpoint, that Jesus was the son of God.

Additional Resources:
(PDF) Booklet: The Lord Our God is One Lord
Blog Post: Facts About the Trinity