First, I am sorry to hear that your wife lost a child so early in life. Hydrocephalus is process that can occur in any stage of life, but has different effects depending on that stage. In all cases, it is an increase in the amount of fluid that is circulating within the hollow center of the brain. In other words, its like a water balloon that gets blown up too much. In young children, hydrocephalus can be caused by malformations in the skull or brain such as the Arnold Chiari malformation, the Dandy-Walker malformation, and cerebral aqueduct atresia. I won't go into the details about what each of those means, but the gist is that hey stop the fluid from getting out of the brain. Genetics plays some but not a complete role in these problems. Thus it is not clear how much increase risk she will have. I suggest that you schedule an appointment with your wife's OBGYN or family doctor
to discuss this issue further. This way you can understand the process that resulted in hydrocephalus in her first baby which will allow for a more educated discussion about the risks for further children. Her doctor may offer a referral to a medical geneticist
who can dive further into yours and your wife's family history and provide you with a more comprehensive view of these issues. Good luck.