Creatine draws water into the muscles from the body. That's cell volumization not water retention. It can make your muscles look larger temporarily and I guess some people can look a little bloated. But cell volumization is a positive effect if you want better muscle performance. It is not the same as water retention, which happens outside the cells, under the skin. Whether creatine causes extracellular fluid retention is still, apparently a matter of debate.

Also keep in mind that some people who complain of water retention while on creatine may be experiencing water gains because of their dietary practices at that time, especially since you will be drinking a lot of water while on it.

I forgot to say, see the Creatine FAQ in the supplement articles section.