The Hydra is sort of a combination of Wario's bike and the Dragoon. Here's how it works:
The Hydra is divided into 3 parts; a main body, a right engine pod and a left engine pod.
Collect all 3 to use it.
When you collect all 3, you ride around on completed Hydra ramming opponents. It doesn't always KO opponents, but it will definitely leave a mark.