Haku gathers water from the air and surrounding environment to form them into a multitude of long needles. He then directs them to a specific target at high speed, leaping backwards before impact so he doesn't get caught in the crossfire. While the needles do surround a target from all sides, they don't appear above the target, creating an escape route.
In the manga and anime, Haku calls this technique by its full name, Secret Technique: Thousand Flying Water Needles of Death (秘術・千殺水翔, Hijutsu: Sensatsu Suishō). The databook entry for this technique drops the "Secret Technique" part.