To dive is to jump head first into the water. You might dare your friend to dive off a boat into a cold lake.
When you dive, you plunge into a pool or other body of water. A bird or airplane also dives when it descends suddenly. The plunge or drop itself is also a dive: "When the plane went into a dive I had to close my eyes." Since 1871, dive has also been used informally for a low-rent or slightly dangerous bar, possibly from the idea that descending to a basement-level establishment involved a "dive" of sorts.