From the Super Mario Wiki
Aqua Land is a kingdom situated entirely underwater, and is located on a seabed somewhere on Mushroom World. Aqua Land appears to be based off the sunken city of Atlantis, down to the Greek-inspired temples and architecture. It is the only known home of the Mermushrooms, and is ruled over by their king, Neptune, Lord of the Deep. Many sunken ships can be found throughout Aqua Land, most of which are shown to contain caches of Gold Coins.
 Barra-Koopa's Takeover
The citizens of Aqua Land lived relatively peaceful lives until one day, when Barra-Koopa arrived with his Bloober army, and enslaved all the Mermushrooms living there, whom he forced to bring him the Gold Coins from their sunken ships. Barra-Koopa also captured King Neptune and sentenced him to be a prisoner in his own dungeon.
 Reclaiming Aqua Land
Hearing that there was trouble in Aqua Land, Mario, Luigi, Princess Toadstool and Toad travelled there in a submarine that was built out of an old bathtub. Upon their arrival, a female Mermushroom who had avoided capture long enough got their attention, but was soon seized by a Blooper. Mario and Luigi defeated the Blooper, who alerted Barra-Koopa of their presence. Upon hearing of the arrival of Mario's group, Barra-Koopa ordered for a Koopa Pack attack, putting his minions on full patrol.
Meanwhile, Mario's group did what they could to diminish the Bloober guards that guarded the sunken ships, mainly by either tricking them or dropping things on their heads. However, Barra-Koopa caught them, and had them locked up in one of the sunken ships, which he figured that they would be unable to escape from.
After narrowly escaping from the enemies that plagued the ship, Mario found an exit, and they managed to escape. Free from the ship, the Mermushroom led the group to King Neptune, whom they freed from the dungeon. With the help of King Neptune and his fishy friends, Mario's group was able to dethrone Barra-Koopa, and ultimately banished him from Aqua Land, ending his reign of terror.