This is a PvE Event similar to fleets and forts. When loaded up, look for Flameheart (big red face in the sky) and start sailing towards it.
* I RECOMMEND LOOTING THE ISLAND FIRST *
As you approach, there will be a bunch of ghosts ships. There will be 2 waves of ghost ships until a boss along with mini bosses will appear. If you only want this achievement, just take out the ship that has red sails and 5 ships around it; this is the boss. Killing this one will instantly end the event but sinking the other mini-bosses will drop more loot & will also get you closer to the "Destroy 500 ghosts ships" achievement.
Rinse and repeat this process 10 times and your achievement should pop.