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It is said to live in a gap in the spatial dimension parallel to ours. It appears in mythology.
– Pokemon Pearl Pokedex
Palkia is the promotional Pokemon of Pokemon Pearl, appearing on the boxart, and being exclusive to it (until Platinum anyway). It’s the ruler of Space while Dialga is the ruler of Time. Its type of Water/Dragon isn’t unique, since Kingdra already had this type combination. It’s a pretty good type combination though, only weak to Dragon. I think its fins are supposed to alude to the water reference, and the fact that Pearls come from the ocean, I guess? But other than that, I don’t really see Palkia as a Water type.
In the anime, Palkia played a big role in the 10th movie, Rise of Darkrai, where it fought with Dialga due to a misunderstanding (they were never supposed to meet, but somehow, they did meet). Whereas Dialga just had the standard roar, Palkia’s roar is pretty unique, and very hard for me to describe. You’d have to hear it for yourself (<–Youtube link).
Stat-wise, Palkia has very high Sp Attack, at 150, it's the highest of all Dragon and Water type Pokemon. It's good that it has good Sp Attack, because its signature move, Spatial Rend, is special. It can also learn other useful special moves like Hydro Pump and Earth Power by level-up. Though its Attack, at 120 base power, is far from bad, and it learns Aqua Tail by level-up (twice, for some reason).
Palkia’s roar was ripped from star wars.