How Water Flows Around a Surfboard's Rail
The shape of a surfboard rail affects how the water flows around the board and ultimately the performance on a wave.
In general, a rounded object will make the water molecules attach to it over a longer surface area which creates drag. Drag is important for control of your surfboard to "grip" the wave allowing you to maneouver up, down, and across it.
A hard or sharp cornered object will allow the water flow to release right off the edge minimizing drag and providing a "looseness" to your board.
Typically a surfboard rail will be rounded from the nose to the fin area where the drag of the rail keeps the board in the wave. As the water exits the tail area it sheds off the hard rail quickly and aids the fins in turning the surfboard.
It is important to note water not only comes in contact with the rail that is penetrating the wave, but also flows off a portion of the opposite rail out of the wave. As water is actually traversing diagonally across the bottom of a surfboard as we ride a wave, the water interacts with the rounded rail in the face of the wave and exits off the hard edge in the opposite corner of the tail during turns. The hard edge helps maintain speed by shedding the water quickly.
In surfboard rail design the goal is to balance the drag and release of both rails to allow the surfer to put the board where he/she wants to go at any time during a ride.
And that's how it works.