The Underwater Reactor is the Mako Reactor that powers the coastal city of Junon. It is an area that you can visit by traveling in to the depths of Junon but it can only be visited during the one time that the story of the game takes you through it.
The team travels to the Underwater Reactor in order to retrieve one of the four pieces of Huge Materia. This is after they have visited North Corel and Fort Condor, but before they travel to Rocket Town to obtain the final piece. Check out the full Underwater Reactor walkthrough section for details.
One important item called the Leviathan Scales are located on the docks just before you board the Shinra Sub. Unfortunately there is no way to revisit this area of the game or retrieve the Leviathan Scales after you have jumped in the Shinra Sub. This means that you will not be able to claim the items in the Da Chao Fire Cavern.
The map below shows the location of the Underwater Reactor (which is attached to Junon) on the World Map:
