The only area in this level is named "Overboard", and it starts with Sam shouting "Oooooooh!", then "Fire!" as he fires a cannonball from one of his three cannons at Bugs' ship; you will have to direct Bugs to catch the ball with his own cannon, and fire it back at the flashing part of Sam's ship (bow, mast or stern). After Bugs has struck Sam's ship four times, Sam will shout "Oooooooh!" again as both he and Bugs go below deck - and Sam will then put three TNT barrels (with sails on them) into the water and blow on them to make them start floating over to Bugs' ship (so you'll have to direct him to blow them back with his air pump). Once one of the barrels has hit Sam's ship it shall explode as a Normal Carrot comes out of it; Sam will then shout "Oooooooh!" again and put a fourth TNT barrel with a sail on it into the water, again blowing on it to make it start floating over to Bugs' ship. Once all the barrels have hit Sam's ship, Bugs will receive a Golden Carrot (but if any of them hit his own ship, he will not, and you will have to replay the level and try again!) and both he and Sam will go back above deck again - but once he's damaged Sam's ship four more times, they shall both go below deck again. Again, once all the barrels have hit Sam's ship, Bugs will receive another Golden Carrot (but again, if any of them hit his own ship, he will not), and both he and Sam will go back above deck once again; once he's damaged Sam's ship four last times, it shall sink and he shall receive the level's only Clock. A rabbit hole will then open up beneath him, and he will automatically jump into it to end the level (for now, if any of Sam's TNT barrels happened to hit his own ship).
Once Bugs has jumped back out of the level's hole, Merlin shall appear and say either: Great. Just perfect. You have completed this level. (if none of the TNT barrels hit his ship) or Good...but you left some stuff behind you! (if one or more of the TNT barrels hit his ship); he shall then say Let me save your position., and regardless of your answer "YES" or "NO", you will then have to either reenter the level for as many attempts as it takes to not have any of the TNT barrels hit Bugs' ship or direct Bugs over to the spring symbol and press 
(Windows: ). Once you have done this, Bugs shall say: Olley-Olley-Oxen-Free! and get propelled up to a hut containing a wheel - and once you kick this, it shall cause the skull rock's jaw to lower (it is also possible to get up there by timing a perfect jump off the top of the signpost). You shall now have to drop back down to the ground, and jump onto the skull rock's now-lowered jaw and into its mouth in turn as you come up to the hole for Follow the Red Pirate Road; once you've jumped into it, you should watch its cutscene carefully (because if you can't remember the order that Sam jumps on the stumps to unlock his lair, you will not be able to get anywhere in it). Much like What's Cookin', Doc?, Bugs will also not be able to collect all of the items in this level until he has been taught all four of the magical abilities, and if you cannot remember the order that Sam jumps on the stumps, you have no choice but to exit this level and reenter it to see the cutscene again.