From the Super Mario Wiki
Crate Burning is a minigame playable in Super Mario Galaxy 2, along with Fluzzard Gliding and Star Ball Rolling. As the name implies, it involves Fire Mario or Fire Luigi burning the Crates on the arena. The minigames can only be played in Rightside Down Galaxy in the mission The Great Crate Incinerator, and in Upside Dizzy Galaxy in the mission Burning Upside Dizzy. The objective of the minigame is to use the Fire Flower abilities (the effects last for the entire minigame) to burn all the crates on the arena (a similar arena to the Bob-omb Blasting minigames from Super Mario Galaxy) within the time limit of twenty seconds. If all of the crates are burned before time's up, the Gearmo rewards Mario or Luigi with a Power Star. Losing the minigame doesn't result in losing a life, unlike others and instead makes the player start the minigame over again.