This is a story related achievement and can't be missed.
*** Spoiler - click to reveal ***
At the end of the "Three Cannon Salute" level, you'll board the pirate ship of General Buttons and Lt. Fluffinstuff.
Notice the explosive barrels on board. Stand next to them and wait until the foes shoot missiles at you, then move away quickly to have the missiles make the barrels explode. Do this for the three sets of barrels and the ship will sink, unlocking the achievement for you.