When a stone is dropped into water, it sinks due to the gravitational force from the Earth being greater than the upward force exerted by the water. Newton's third law states that forces between two objects are equal and opposite, but the forces acting on the stone and the water are different in nature. The water exerts a viscous drag force on the stone, which is not equal to the gravitational force acting on the stone. The gravitational force from the Earth on the stone is equal and opposite to the force from the stone on the Earth, thus adhering to Newton's third law. Ultimately, the stone sinks because the gravitational force exceeds the combined forces acting against it, including buoyancy and drag.