The Kraken is a mythical creature usually mentioned or seen in Pirate-related content. No use for the Kraken has been stated yet for Sea of Thieves, but the trailer does show a scene where the Kraken, is sinking a ship.
During the night in Sea of Thieves, an echoing deep noise is heard underwater and above water. This could possibly be the Kraken as it differs immensely from a Whales sound. As the Kraken appears, the water around the ship will turn pitch black and your ship will stop moving if not already. The best way to defeat the Kraken is by shooting it with the cannons on your ship when it’s mouths are opened.
There is no known reward for defeating the Kraken, however an achievement is given to the player after defeating it.