Narrated Ibn Abbas (radiallaahu `anhu):
I gave Zam-zam water to Allah's Apostle (sallallaahu `alayhi wasallam) and he drank it while standing. 'Asia (a sub-narrator) said that 'Ikrima (radiallaahu `anhu) took the oath that on that day the Prophet (sallallaahu `alayhi wasallam) had not been standing but riding a camel.
How to solve this mystery? Did the Prophet (sallallaahu `alayhi wasallam) drink Zamzam while sitting or standing? What's sunnah and what's not? Read on..
The fuqaha’ have mentioned the etiquette that is mustahabb (recommended) when drinking Zamzam water, such as facing the Ka’bah, saying Bismillah, pausing to take a breath three times, drinking one’s fill, praising Allaah after one finishes, and sitting whilst drinking it, as one should do when drinking other kinds of drinks. As regards the hadeeth of Ibn ‘Abbaas (may Allaah be pleased with him), who said, “I gave the Prophet (peace and blessings of Allaah be upon him) Zamzam water to drink whilst he was standing,” (reported by al-Bukhaari, 3/492), it is taken to mean that it is permissible to drink whilst standing, and the disapproval of doing so is understood to mean that it is makrooh. The scholars also recommended that the person who drinks Zamzam water should sprinkle some of it on his head, face and chest, make lots of du’aa’ when drinking it, and to drink it for a purpose that will benefit him in this world or the next, because of the hadeeth in which the Prophet (peace and blessings of Allaah be upon him) said: “The water of Zamzam is for whatever purpose it is drunk for.” (Reported by Ibn Maajah, 2/1018; see Al-Maqaasid al-Hasanah by al-Sakhaawi, p. 359).
Taken from IslamQA.
Other virtues of Zamzam here.
Taken from: http://ilookilisten.wordpress.com/2013/03/11/drinking-zamzam-hadith-no-1401/