This is done after completing the game.
After beating the final boss, return to the original hub world and you will find a key on the ground where you defeated the final boss.
This key unlocks a tower in the Lost Cemetary area. The tower is located to the left of the Death's Door (where you fought the crow) and is right before you enter the Witch's area.
After you unlock the tower, climb the ladder and you will find a bell. Strike the bell to turn it from day to night. Now go back to the Stranded Sailor, and go inside the ship (it has the blue neon fish on it). Once inside, talk to the squid in the tank. He will explain his situation and hop on your back to take you to a "treasure." The achievement will pop as soon as he jumps on your back, you don't have to get the treasure. (EDIT: But as LeapofFaith77 points out, it is best to just go get the treasure if you are pursing completion, as the squid takes you to one of seven tablets you need to get get the secret ending)
EDIT: To initiate the conversation with the squid you need a specific shiny item, the Ink-Covered Teddy Bear. Luckily this item is very close by, head south of where the squid is located to a wooden pier. You need to hookshot across the water and you will enter a fight with one of the big guys with the hammer (Smough from Dark Souls). Defeat him then climb the ladder that appears, and the Ink-Covered Teddy Bear will be sitting there.