Deserts are formed when rain clouds run into wind or mountains and drop rain in one area, leaving the land further away dry.
Deserts that form near bodies of water are usually caused by winds. For example, the Sahara desert, near the Mediterranean.
Deserts near mountains are formed when rain clouds drop their rain on one side, and the land on the other side of the mountains stays dry. For example, rain clouds sail over India and meet the Himalayas, dropping their rain on India and forming the Gobi desert on the other side of these mountains.
Hydrological drought refers specifically to the impact of low precipitation on a hydrological system (a river basin, for example.) while this will have the same cause as a meteorological drought, it is possible that the effects of the drought may not be readily obvious.
Dams are built on rivers to act as flood defences, to create reservoirs as stores of water for industrial, agricultural and recreational use, and also to provide electricity through hydroelectric power. However, restricting the flow of water in the rive can lead to a drop in water levels further down stream. This can leave an area in drought as it no longer receives the same amount of water as before the construction of the dam.