His children were captured by Water Workers and trapped inside the large towers guarded by electric fences and crabs. Flippy had put explosives on the locked doors, but couldn't get them out himself, and so he asked Spyro to get them out. After he did so, Flippy awarded him with an Orb.
It's unclear to whether or not he's the king or leader of Aquaria Towers. Seeing as he's the only seahorse claiming to have any authority, it can be assumed that he is the king of Aquaria Towers.