Naval Piranha was a normal sized Piranha Plant until Kamek used his magic on her. As the name says, she does indeed live in the water. Her first appearance was in the Super Mario World 2: Yoshi's Island game where to defeat her Yoshi had to throw an egg at her weak point which was a bandaged stub of a bud-to-be on her main vine. Naval Piranha will spit out Nipper Plants to attack Yoshi. Yoshi must eat them to get eggs.
There is a secret way to defeat her without having to battle her though and that is if before the gets enclosed and if you have up to six eggs that you can fire them at her bud form before she grows. Kamek will be surprised and go "Oh My!!!" But if you miss all of the shots, you must fight her with no eggs or start over by letting Baby Mario get captured by Kamek's Toadies, or exit the level by quitting which isn't really the best thing to do given any situation.