Correction: By mistake, I credited Milt Kahl with shot 21.1 in the mosaic. The Jiminy animation is by Woolie Reitherman. I've edited what's below to reflect the correction. Unfortunately, I'm not going to be able to correct the mosaic itself until early September, as I'm away from home. I'd like to thank The Spectre for catching the mistake and pointing it out in the comments.
Correction 2: Courtesy of Galen Fott, the mosaic has been fixed and edited into Pinocchio Part 21. Thank you, Galen.
This sequence is very typical of the 1930's fantasy genre in animation. In the Silly Symphonies, Happy Harmonies, Merrie Melodies, Color Rhapsodies, etc. animated films would create worlds unfamiliar to audiences purely for their novelty value. It's animation's version of spectacle.
Pinocchio earlier showcased spectacle scenes like Geppetto's clocks and Pleasure Island, but as this film nears the climax, all the stops are pulled out in the scenes revolving around the search for Geppetto and his rescue. We have the creation of an underwater world, chock full of effects animation to make the world as vivid as possible. The art direction and effects are really the stars of this sequence more than anything having to do with story or animation.
After Pinocchio jumps into the water, really nothing happens except that he moves through the environment while searching for Geppetto. It's the variety of ocean life and the vivid detail in the backgrounds and the effects that provide appeal for the audience. The bubbles, the reflections, the ripple glass effects, and the audio distortion are what make this sequence believable.
While there are top animators at work here (Reitherman on Jiminy, Kahl and Clark on Pinocchio), there's really little in the way of acting or gags. Reitherman gets the best raw material with Jiminy taking on ballast and interacting with the fish. One of the most interesting Jiminy moments, when he's stuck in a rapidly filling bubble. While Kahl gets the Pinocchio acting scenes, there's not much interesting here. Like Frank Thomas in the last sequence, I feel that Kahl was wasted. Lesser animators could easily have handled Pinocchio in this sequence.