From the Super Mario Wiki, the Mario encyclopedia
Mario in Peril status

Peril is a status effect that appears in the first three Paper Mario games. It occurs when Mario or any of his partners goes down to exactly 1 HP, causing a bubble with the words "Peril" to begin flashing next to them. A high-pitched alarm like sound can also be heard, as an alert that the player should use a healing item. Certain badges can only be used when Mario is in the Peril status.