This is unlocked at the end of mission 22, the same as the burning shopping mall achievement.
The water cannon, as briefed, isn't terribly effective against zombies, but it will kill if you keep it on them. It's only useful at slow speeds because of that, but it's still useful if you've got a burster coming at you.
Start with the secondary objective, the mall in the top right corner. This differs from the rest in that there's a spawner right next to the mall, and you can't destroy it. Circling isn't effective, you'll have to come back from multiple angles.
As for the actual fires, it's pretty cut and dry. You can see the fires dwindling, and they don't sprout back up if you aren't hitting them. Just make sure you're at the proper sites, as there's plenty of burning things around.