- "Stannis is a commander. He's led men into war twice. He destroyed the Greyjoy fleet."
- ―Eddard Stark
After the defeat of the ironborn in the Battle of Seagard, Lord Stannis Baratheon, Master of Ships to King Robert Baratheon, smashed the Iron Fleet, paving the way for the Iron Throne to invade the Iron Islands themselves and ultimately crush the rebellion.
While Robert is dying, his youngest brother Renly argues with Eddard Stark that he should succeed ahead of middle brother Stannis, citing that Stannis is not fit to be a king because he is a stern man who inspires no love or loyalty. Eddard counters that Stannis is a proven battlefield commander, in both Robert's Rebellion and the Greyjoy Rebellion in which he "destroyed the Greyjoy fleet" (though he doesn't mention the "Battle of Fair Isle" by name).
In the books
In the A Song of Ice and Fire novels, Stannis and Lord Paxter Redwyne were sent to deal with the Iron Fleet, following the attack on Lannisport. Stannis devised a trap for Victarion Greyjoy: the Iron Fleet was in the Straits of Fair Isle, in the Sunset Sea, with the island to their west and the mainland of the Westerlands to their east. Stannis's ships trapped them from the north and the south, smashing the Iron Fleet off the coast of Fair Isle. Aeron's ship Golden Storm was destroyed and he was taken captive.
The Battle of Fair Isle was one of the largest naval battles fought in several decades, and one of the largest fought entirely at sea. No major naval battles were fought in Robert's Rebellion, which was conducted almost entirely on land. It is unknown if any of the five Blackfyre Rebellions fought during the past century involved extensive ship-to-ship naval warfare - the final War of the Ninepenny Kings against the last Blackfyre Pretender at least needed ships to transport soldiers to the Stepstones where the rebels were based, but it hasn't been stated if the rebels had their own fleet which tried to repulse the Royal Fleet.
Only the subsequent Battle of the Blackwater neared the Battle of Fair Isle in size, but that was not primarily a naval battle between ships but an amphibious landing. Even so, there wasn't much ship-to-ship fighting in the Battle of the Blackwater, as most of Stannis's fleet was destroyed in the wildfire trap set by Tyrion - and the Lannisters also used up many of their remaining ships by converting them into fire-ships to carry the volatile wildfire.
Victarion has never forgotten the Battle of Fair Isle. He sometimes reminds it to himself as a lesson that one has to learn, in order not to be overconfident and underestimate opponents. It does not mean Victarion refrains from taking risks; whenever a battle is imminent, he evaluates the situation gravely, taking into consideration possible steps that his enemy may take.