This is Mario's default state when he starts a new life or takes a hit as Super Mario or Fire Mario. As Small Mario, you are highly vulnerable; any single hit from an enemy or environmental hazard will result in a lost life. You cannot break brick blocks from below, limiting your access to certain areas and power-ups. Your primary goal as Small Mario should always be to find a Super Mushroom as quickly as possible to gain an extra hit point and the ability to break blocks. While vulnerable, Small Mario is also slightly smaller, which can sometimes allow him to squeeze through tight gaps that Super Mario cannot, though these instances are rare and usually unintentional.
While this diminutive form makes Mario more fragile than in Mario Kart DS, where weight classes dictate physics, it also provides a smaller hitbox for dodging projectiles.
While Small Mario is defined by fragility, Super Mario RPG shifts this dynamic by utilizing a turn-based HP system where even a low-level Mario can survive several direct hits.