Earth life can be described as both. "Carbon-based" is a description of the basis of the chemistry on which our biology is based; "Water-based" is the description of the solvent in which those chemicals interact. A complete, less ambiguous description of Earth life would be "life with carbon-based biochemistry in a water-based environment".
Theoretically, "biochemistry" could be based on something other than carbon, but it's generally considered rather improbable, so in ED, all known atmosphere-based lifeforms are "carbon-based biochemistry". Specifying "carbon-based chemistry" is therefore somewhat redundant. There are, however, two commonly encountered environments: the more common water-based environment - Earth and other Earth-like planets, Water Worlds (which contain "carbon-based biochemistry in a water-based environment" lifeforms, but the planet's surface conditions cannot support human life without artificial aids) and Gas Giants with Water-Based Life. Then there are the less-common ammonia-based environments (Ammonia Worlds and Gas Giants with Ammonia-Based Life), within which liquid ammonia has the same role as water does on Earth, forming the solvent basis for the carbon-based biochemistry.
either way not sure how a 73% hydrogen / 29% helium gas giant has water based life
Well, if you look at the composition of Earth's atmosphere, it's 78% nitrogen, 21% oxygen, 1% argon and trace amounts of other stuff. Neither carbon nor water get much of a mention - carbon isn't mentioned because the levels are so low (only 400 ppm carbon dioxide, though many humans on 21st century Earth believe even this is too high) and water isn't mentioned because the amount of water in the atmosphere varies depending on altitude and the local climatic conditions - from near-zero in the dry deserts to 5% in the humid jungles. The point being, the majority components of an atmosphere are not necessarily indicative of the components of the biosphere, because the biosphere relies on chemicals that are only present in the atmosphere in trace amounts.
The Sudarsky Classification System of gas giants used in ED is a hypothetical model of classifying a gas giant based on what chemical forms the visible cloud layer. "Hypothetical", because all the gas giants in Sol system are Class I (ammonia clouds), and we can't see gas giants around other stars clearly enough with current technology to be able to detect what their clouds are made of and therefore definitively fit them into a Sudarsky class.
Under the Sudarsky system, gas giants with water clouds are Class II. "Gas giants with water-based life" are therefore merely a subset of Class II where the clouds have been colonized by life, just as those with "ammonia-based life" are a subset of Class I gas giants.
