Only certain corals can be upgraded and these are generally coin producing corals. Eligible corals will have a little yellow upward arrow button beside them when you tap on them that you can select. Then this brings up your coral inventory and you can drag any corals you no longer need down to the coral you are upgrading to feed it. The progress bar indicates how far it is till it is levelled up. Each coral will contribute different amounts and the number is shown beside the coral box e.g. +10. It is best to only feed it other coin producers which you can get easily again from the crab as if you feed it fish feeding corals you may regret this later and these cost more to replace. The coral will grow once it has been levelled, and a progress bar shows this.