May be in reference to the thermal protection valve, which prevents over heating/over pressurization of the water tank, and prevents it from blowing up.

"If the water is already hot, why does it need a heater?"

A drip line should be installed on the T&P relief valve to extend within about 6-8 inches of the floor. The pipe should be the same size as the relief valve and not threaded at the bottom.

The water is hot already, but it is being heated to a higher temperature. Therefore, a hot water heater.

Actually, I just looked at my inspection report again and realized that it is not a "drip T valve", just a "drip T". I talked to a plumber and he said that a "drip T" is actually a filter that is located in the piping. Is this correct and can anyone expand on this?

drip tee is installed on the gas-line just before it enters the gas-valve for the water-heater...if there is condensation inside the gas-pipe it falls to the bottom of the tee as opposed to entering the valve...erik