Physical water scarcity is what it sounds like. Physical access to water is limited. When the demand outstrips the lands ability to provide the needed water you have physical scarcity. For the most part, dry parts of the world or arid regions are most often associated with physical scarcity. However, there are an increasing number of regions in the world where physical scarcity is a man-made condition. The Colorado river basin in the United States is an excellent example of a seemingly abundant source of water being overused and over managed, leading to very serious physical water scarcity downstream.
Economic water scarcity is by far the most disturbing form of water scarcity because it is almost entirely a lack of compassion and good governance that allows the condition to persist. Economic water scarcity exists when a population does not have the necessary monetary means to utilize an adequate source of water. Economic water scarcity is about a unequal distribution of resources for many reasons, including political and ethnic conflict. Much of sub-Saharan Africa suffers under the effects of this type of water scarcity.
Without question, economic water scarcity in an issue that can be addressed quickly and effectively. The Water Project's key goal is to provide the means necessary for communities suffering from it to find relief. Access to clean water can be as simple as building small dams to catch rain water, or rain collection systems to collect rain from rooftops. It simply takes some money, a bit of engineering and some local construction efforts.
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You can read more in this comprehensive report from World Water Week, Stockholm 2006.