The "Collision" condition for objects "A" and "B" will only trigger when object "A" transitions from a state of not overlapping "B" to a state of overlapping "B".
The "Overlapping" condition will be true whenever "A" overlaps "B". (e.g. If you put this condition in a top-level event by itself, it will run every tick.)
Collision is a "triggered" condition, while Overlapping is a "true/false" condition. In fact the little green arrow just to the left of the collision condition is to indicate that it's "triggered" instead of "true/false". Triggered conditions don't get checked every tick, instead they just execute instantly when their criteria are met.
(See the header "Events run top to bottom" in this article for more about the difference between the two condition types.)
There are a few ways to get the continuous damage effect...
Smooth damage over time
You could have the lake deal a very small amount of damage every tick, (every frame-draw, about 60 times a second). This would cause the health to drain smoothly while in the lake. This is probably the simplest to program. You can also optionally use decimal damage values less than 1.0, and round the hp number when displaying total hp.
Chunk damage every second
You can have an event check every second to see if the player is overlapping the lake, and if so deal damage to the player. If you want the damage to come in chunks, this will do it, but this particular method is not such a good approach to chunk damage.
If a player steps in the lake right after a 1-second-check, and the player gets out right before the next 1-second-check, they'll take no damage. Even if they don't get out, it could take nearly an entire second before they take damage, which could look weird.
Chunk damage every second of exposure
This is probably the more elegant way to deal chunk damage. You deal a chunk of damage when the player *Collides* (not overlaps) with the lake, and you start a 1-second timer, (using the timer behavior). When the timer triggers, you check to see if the player is still overlapping the lake, and if they are, you deal a chunk of damage, and start the time again.
If a player jumps in the lake they will instantly take damage, and every second afterwards if they stay in the lake, that 1-second time will deal damage and reset, over and over.