After having the Poseidon statue smash the bubbling floor, Indy goes
in and finds himself with a giant squid named Kraken.  The cut
scene finishes with Kraken coming out of his home to have you for a
snack.  He doesn't go any where farther beyond the four cracked
pillars (you will use them later) Kraken launches two sets of 7 yellow
jellyfish who latch on to you and drag you to Kraken to feed him. 
Do not attack him or the jellyfish just yet.  Angle Indy left and
up a little you will find ground low enough to climb up to dry land. 
Climb up as far as you can, you will find two open boxes; each
containing two demo charges (TNT).
     Next to it is... BUM... BUM... BUM... BA,DUM!! 
The Golden speargun (aka super speargun!!  With two sets of
speargun ammo.  Pick up the gun with the ammo and two demo
charges. The golden speargun holds 300/0 which means you don't have to
reload.  Jump in the water and take out all the jellyfish. 
1 spear per jellyfish (DONT GO INTO FIRST PERSON MODE) Fire the spear
gun in 3rd person mode indy will automatically lock on to a jellyfish;
you just need to press that (A) Button.  When all the jellyfish
are killed, quickly go into first person mode and fire a few spears at
one of Krakens yellow eyes; Krakens kalamari body will contract, his
eyes will close and then go into his home.
     As quick as you can, go up real close to one
of the front two pillars cracks and plant a demo charge by pressing
the (Y) Button; quickly, go to the other front pillar and plant the
other charge, a short cut scene will play for each of em (exploding). 
Kraken will come out and trust you away if you planted the charge at
the last second.  Kraken will launch another barrage of yellow
jellyfish.  Climb up to dry land and pick up the other two
charges; jump in water, kill jellyfish, shoo Kraken away like how you
did before. 
     Now plant the other two charges on the cracks
of the two back pillars.  Swim away, and wait for Kraken to come
out and the charges will explode resulting all four pillars to fall
down and shoo away Kraken for good.  The water will drain away
for some reason.  Steps will creep out somewhere but it will show
you in the cut scene then the artifact will come out in the cut scene. 
Go over to the artifact to get it the Chinese chick talks to you and
takes your reward.  You then go to Hong Kong.  Go have some
sushi! :) You've earned it, but there is still more along the way for
Indiana Jones.