Tiara lived in the Cap Kingdom, along with her older brother Cappy. However, she was kidnapped by Bowser and was forced to become Princess Peach's wedding tiara. (which was why Peach was wearing a tiara instead of her usual crown) This prompted her brother and Mario to rescue both damsels.
After you complete the game, Tiara explores the world with Peach, much like her brother and Mario.
Tiara is a bonneter who resembles a bridal tiara, as her name implies. She has the same eyes as her brother, with eyelashes. Like Cappy, she has magenta eyes.