From the Super Mario Wiki, the Mario encyclopedia
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The Red Gem is a special item in Paper Mario: The Origami King. It is found within the Sea Tower and is used to open a path to the second floor. On the first floor, there are two dragon statues, each with a gem in its mouth. The statue on the left holds the red gem in its mouth, while the statue on the right possesses a blue gem. However, when the Sidestepper in front of the statue on the left is approached, it takes the gem and runs off to the left. If Mario examines the statue on the right, Olivia takes note of the gem in its mouth, wondering if it is tasty. If Mario examines the statue on the left missing its gem, Olivia thinks it is sad and suggests an offering to make it happier. If Mario tries to give the statue an item other than the gem, Olivia states she does not think it is what the statue wants.
With the door to the second floor unavailable, Mario must follow the Sidestepper into the room on the left. After making it through this room and dropping down to the Sidestepper, it scurries off again to the adjacent room. This room in fact has a very similar structure to the room in the Water Vellumental Shrine. Mario must hammer below each of the heads on the wall to drop them down, creating a narrower path for the Sidestepper traveling through the cracks. Eventually, it becomes blocked off by the closed head in the northeast corner and at this point in the game can be defeated without a battle. Having recovered the gem, Mario must return to the center room on the first floor and insert it into the left statue. Doing this fixes the statue and lights up the other eye of the Water Vellumental statue, which opens its mouth to fill a pot in the middle, fixing the head of the Earth Vellumental in addition to connecting the stairs, allowing Mario to reach the second floor.