From the Super Mario Wiki
This article is about the item resembling a peach. For information about other uses of the word "peach", see here
Peachy Peaches are a fruit found in both Paper Mario: The Thousand-Year Door and Super Paper Mario. The Peachy Peach is a restorative item, and its effects can be improved through cooking. Peachy Peaches can combine with other items. Some items can even become higher quality versions of themselves as a result of a combination with a Peachy Peach. Peachy Peaches themselves can be created as the result of a failed cooking attempt, usually involving an offensive item such as the Fire Flower.
The Paper Mario: The Thousand-Year Door version of the item restores only one Health Point and two Flower Points on its own. The Twilight Town innkeeper leaves a Peachy Peach on the table as thanks to Mario and his partners for staying at his inn.
In Super Paper Mario, the fruit's restorative power is greater than in the previous game; it heals seven HP and cures Poison. When he chooses the Flower package, Mario can flip into 3D to find a Peachy Peach left for him and his partners when they stay at Inga's Inn. They can also buy the item for 19 coins from Flimm or for 25 coins at the Itty Bits store in the Dotwood Tree. During Chapter 7, Princess Peach temporarily turns into a Peachy Peach if she eats a Pink Apple to wake her from the slumber, which a Golden Apple has given her in The Overthere.
In addition, generic Peaches that resemble giant Real World peaches appear in both Donkey Kong Jungle Beat and Super Smash Bros. Brawl.