The Under Toad is an inside joke between Helen and Garp. It starts after Walt uses the phrase to describe the undertow, which he figures is a giant amphibian waiting to pull unsuspecting swimmers underwater. The phrase, then, is a shout-out to Walt's innocence—to dig into why this matters, be sure to read up on him in the "Characters" section.
Beyond Walt, though, Garp and Helen initially use the phrase to refer to anxiety. This is fitting insofar as anxiety actually works a lot like actual undertow, with its unseen currents pulling you in all sorts of uncomfortable directions. But in the final chapters, Garp and Helen can sense that "the Under Toad was strong" (17.335), that it's following them. Although they hope that the blood-thirsty Under Toad will be satisfied, it finally catches up with them in the form of Pooh Percy when she kills Garp.
It's then that Garp realizes that there's no reason to be afraid of the Under Toad after all. You see, the Under Toad isn't just the Amphibian of Anxiety—he's the Grim Reaper, the thing constantly pulling us out of life and into death. When Garp understands this in his final moments, he is comforted because he finally realizes that this is one frog he won't be able to out-hop. Even as death is coming to get you, it's already won—it never loses. So for once, Garp can just throw in the towel and let life happen.