Mermaid Lagoon is surrounded on three sides by cliffs with many ferns and plants on them, but one side goes out onto the sea. On this side there is also a stone archway, on the other side of which you are faced by the open sea and "out" of the lagoon. There is a gathering of rocks in the middle of Mermaid Lagoon, on which the mermaids inhabiting the Lagoon like to sunbathe and spend their time out of the water.
Though mermaids are the only known beings living in Mermaid Lagoon other than fish and other sea-creatures, others do occasionally visit the lagoon - a frequent visitor is Peter Pan, who seems to enjoy the mermaids' attention and tells them stories of his heroic battles with Captain Hook.
In Rani in the Mermaid Lagoon, Rani uses this location to visit the mermaids.
In Prilla's Talent, Prilla compared the sound of a baby's laugh to that of mermaids "frolicking in the lagoon of Never Land."