This refers to an object, like a plane, going into a rapid downward descent in the air. This can also refer to a person jumping in the air when skydiving, which in Portuguese is called paraquedismo.
O avião foi atingido por raio e mergulhou. The plane was hit by lightning and took a nosedive.
Tenho medo de fazer mergulho do avião. I’m afraid to jump out of a plane.