From the Super Mario Wiki
The Golden Plunger was originally located in the town square of Cramalot, wedged inside the Sacred Sink of Cramalot. It is said that whoever removed the Golden Plunger from the Sacred Sink of Cramalot would gain untold power and be crowned the new king of Cramalot.
Mario, in order to defeat King Koopa, managed to pluck the Golden Plunger from the Sacred Sink of Cramalot, though he later had the Golden Plunger taken from him by King Koopa. Later, when Mario dueled a Golden Plunger wielding King Koopa, he managed to knock the Golden Plunger from King Koopa's grasp with the Excalibur; what happened to the Golden Plunger afterwards is unknown.
The full extent of the Golden Plunger's power is unknown, as the only ability of it that was shown was its power to disintegrate objects.