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.