You didn't say if this is a cinder block vs. poured wall or how old it is. The most common reason I can think of for a straight vertical crack is uneven settling of the footings, which is most likely to occur following deep ground saturation as is usually the case following warm weather and rain (a Chinook) on top of several inches of snow or ice, and most often occurs in relatively new construction.
With a through and through crack, you are probably right that you will need to seal the outside of the wall. Hot mopping tar on #30 felt won't work. The tar will get hard and brittle and if the foundation settles even a little more (and it most likely will), the tar will crack, letting water in again. You only want to do this fix once! :-)
There are several products and methods of exterior wall sealing, most often used in new construction. Plastic waffle board, spray on elastic sealant, installing copper or aluminum drip mold to the foundation just below grade, circumferential drain pipe and a sump pit....just a few options. I'd do a little reading up and then visit several foundation contractors. Unfortunely, it won't be cheap, but if done right, will fix the moisture porblem for good.