The Battle of the Blackwater was a large and fierce land and sea battle in the War of the Five Kings that took place in A Clash of Kings. It began after Stannis Baratheon sailed for Blackwater Bay, where King's Landing rests.
Tyrion Lannister as Hand of the King had burned all the structures that pressed against the outer walls. And had three large catapults built.
Ser Imry Florent was in command of Stannis' fleet and chose not to send scouts into the harbor, over Davos Seaworth's objections. The fleet had been delayed by weather and Stannis had been waiting with a standing army for two days. As their number of ship was superior to Joffrey's, Florent did not think scouts were necessary. Stannis' fleet was met with other boats in King Joffrey Baratheon's fleet, Tyrion said that he had to send the fleet out, because otherwise the opposition would have known it was a trap. Either way, the ships would have been lost anyway. Davos still knew that something was wrong. He saw the two new towers and realized that is was a chain, but it hadn't been raised to keep them out. Davos also saw that Joffrey's best ships were not there.
The ships in the harbor were then near totally destroyed by the thousands of jars of wildfire that were flung from the ramparts of the city and loaded into derelict vessels that were floated out. Tyrion Lannister was instrumental in the battle; he prepared the wildfire and also commissioned a large iron chain that was raised at the mouth of the river after the fleets had entered the bay so that they could not retreat from the wildfire. Only Sallador Saan, who was never fully trusted, had been told to stay back and not enter the Blackwater Rush. (So his ships escaped the trap and were able to take Stannis and as many of his men that could fit on board back to Dragonstone after the Battle.)
Stannis had planned to have the the ships ferry his army to the very gates of the city, but now the army had to advance within the range of the catapults to the city wall. Many died.
After the Hound, terrified by the fire, resigned his command, Tyrion then led a group of soldiers out to destroy the survivors from the fleet. A large part of Stannis' force was on land, and might have taken King's Landing but for Tywin Lannister and the Tyrells, who took Stannis in the rear (as was Loras Tyrell's way) and secured the victory for King's Landing.
The battle was viewed from several POV chapters including Sansa Stark's, Tyrion's, and Davos Seaworth's. During the battle, Tyrion was attacked by Ser Mandon Moore and would have died if not for his squire Podrick Payne. Tyrion is gravely injured, almost all of his nose is cut off and he almost loses an arm to an injury caused by a crossbow bolt. After he wakes Tyrion is informed that he has lost his his power and position of King's Hand as his father has arrived to claim them. Tyrion was instrumental in decreasing the strength of Stannis' much larger forces and holding them off until reinforcements could arrive, but he gets no honors and little praise.
Meanwhile, Davos Seaworth is stranded in the bay and nearly dies, Alek Nocher originally ordered by King Joffrey to make war on Highgarden also joined up with the Lannister/Tyrell army and slew the young and zealous Ser Emmon Plumm a Stannis loyalist, and the Tyrells join forces with the Lannisters.
At the victory ceremony, Petyr Baelish is made Lord of Harrenhal for brokering the Lannister-Tyrell alliance. Loras Tyrell asks to become a member of Joffrey's Kingsguard to replace Moore, whom Podrick killed, and Garlen Tyrell (who had worn the armor of Renly in battle, making many think it was Renly's Ghost returned) asked for Margaery Tyrell to be made Joffrey Baratheon's new betrothed queen in place of Sansa Stark.