The water heater’s thumping is caused by sediment that has built up in the bottom of the metal tank or around the electrical heating elements. The illustration shows a gas water heater with this problem. The sediment interferes with even heat transfer and allows steam bubbles to form. The bubbles float upward and then implode with a muffled thump.
You could try to drain sediment from the bottom of the tank. Attach a hose to the drain valve and route it to a safe plumbing fixture, such as a floor drain. Be careful; the water will be hot. Drain a few gallons; repeat this several times. Often, though, sediment is difficult to remove from the tank.
The thumping does not cause any damage to the water heater, but it certainly is annoying. Consider installing a water softener to eliminate the hard water sediment.
By Tom Feiza, Mr. Fix-It