After you go through the cave in Chapter 2 and find the Dolphin's son locked up, you battle Octo the Huge.

Location of Octo the Huge

Octo the Huge is the boss of the Chapter 2 Dungeon.

Defeat Octo the Huge

Jump from tile to tile to avoid the orbs that Octo the Huge spits out.

When Octo the Huge comes close to you, you can press START to pause the game, then select the Snowman Doll to temporarily freeze Octo the Huge in place. Hit Octo the Huge repeatedly with the Baseball Bat or Star/Yo-yo until it thaws out.

After you run out of Snowman Dolls, just try to hit Octo the Huge as many times as you can whenever it gets close.

Moving On

After you defeat Octo the Huge, there will be a cutscene, then you will be back in the overworld. Go into Sub-C and approach the boy Dolphin. There will be a cutscene. You will automatically follow the dolphins, then you will proceed to Chapter 3: Storm and Calm.