What does it mean for a 4 year old boy to have a swollen watery like lump on the right side of his penis? It is slightly red underneath.

I don't know, but I once had a 4 year old boy and if anything was wrong that I didn't understand I took him right away to the Doctor. He is now 27.
You should have the Doctor check him.

When was the last time you took him to see his doctor as this needs to be looked at. If he has a foreskin he might have an infection.

Lets us know what it was.