The phrase “Jump the Shark” is a reference to the televisions show “Happy Days”. It refers to an event in a television show (or by analogy any other long-running cultural product, or series of cultural products) which epitomizes its decline (usually into absurdity) and presages its demise.
In the episode in question The Fonz jumped over a shark on water skis.
Uhh . . . The Fonz was on the skis. The shark was just doing its thing . . . swimming around . . . it got in the way so The Fonz jumped it (with his water skis on). That segment was marked as the beginning point of the Happy Days decline in quality productions.