From the Super Mario Wiki, the Mario encyclopedia
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, manages to pluck the Golden Plunger from the Sacred Sink of Cramalot, though he later has the Golden Plunger taken from him by King Koopa. Later, when Mario duels a Golden Plunger-wielding King Koopa, he manages to knock the Golden Plunger from King Koopa's grasp with the Excalibur; what happens to the Golden Plunger afterward is unknown.
The full extent of the Golden Plunger's power is unknown, as the only ability of it that is shown is its power to disintegrate objects.