The Black Skull is a ship that is said to surpass any body of water, no matter how devastating the weather might be. But, the Black Skull can only sail if Cortez has the Skull Gem, which was stolen from him by Flavio's ancestors long ago. Flavio inherited the Skull Gem and takes it wherever he goes, even before he makes it to Keelhaul Key. Flavio also uses the Skull Gem to destroy the wall separating Keelhaul Key and the Pirate's Grotto. The Black Skull was parked in Pirate's Grotto before the Skull Gem was stolen, so the Black Skull stays there, unable to move at all. Cortez rests in the Black Skull and uses the ship to store his vast treasures, including the Sapphire Star he stole from the legendary Koopa hero.
Mario goes into the Black Skull at the end of the chapter and fights Cortez there for the Sapphire Star. After Mario defeats Cortez, Cortez gives Mario the Sapphire Star voluntarily. When Mario and Flavio go outside to the outskirts of Keelhaul Key, Lord Crump attacks them on his own ship, the X-Ship. Since the S.S. Flavion was sunken, and it was only a sailor ship besides, they do not have a ship to fight back with. So, Flavio gets the idea to ask Cortez for his ship. Mario and Flavio go back to ask, but Cortez says that his ship cannot move without the Skull Gem. Flavio has the Skull Gem, and offers to give it to Cortez if they can use his ship. Cortez agrees being extremely angry at Flavio, and so Cortez sails the Black Skull for the first time in many years. Cortez summons some Embers to fight off the X-Nauts, and attacks the X-Ship. Mario and his allies fight Lord Crump and his disposable X-Nauts on the X-Ship, not the Black Skull.
After beating Lord Crump and the X-Ship sails away defeated, Cortez sails Mario and the rest back to the Rogueport Docks. Cortez parks the Black Skull at the Rogueport Docks and offers to sail Mario and co. to Keelhaul Key and back whenever he wanted. Thus, Cortez replaces the Whale from the original Paper Mario, being the mode of transportation to the fifth level in the game. Cortez's ship takes you to the very edge of Keelhaul Key, but you could take the Warp Pipe in the Rogueport Sewers connecting to Keelhaul Key as well.