They're analysing the forces on a particular region of the water, treated as a block. It's the region lying 'under' the cylinder, i.e. it's bounded by a vertical line through point A, the floor of the chamber, and a quadrant of the cylinder. Fy is the vertically upward force on this block from the floor of the chamber. It must be equal and opposite to the force the block exerts on the floor. The pressure there is the pressure at 5m depth.