So what is Small Wario anyway?

[CM30]

In the earlier games, it seems that's Wario's default size. He shrinks back to it when taking a hit in Wario Land 1, reverts back to said form after the battle in Super Mario Land 2 and generally has it treated like Small Mario in the Mario franchise.

However that seemed to change in later games. In Wario Land II and Shake It, it's a transformation activated by either a magic spell or a special object called a Mini Barrel. And then in WarioWare, it seems to be a weird side effect of science gone wrong or a set of minions that follow Wario himself.

So what is Small Wario? How does this form actually work?

 

[Just a Wario Fan]

I think it was originally meant to be like Mario when he takes damage. Later, as Wario gained more of a personality and his own series went on with the transformations this feauture became much more obsolete. In the more modern games it is just one of his forms. And sometimes, like in Smooth Moves where this transformation occurs because of the bike Penny built for him, it's just some kind of ¨throwback¨ to the early games. But I hope it will return sometime in the future.

 

[wariolandgoldpiramid]

In Wario Land 1, Wario always starts the stage big, and grows upon completing the stage. I take it as Wario's natural form, and the small damaged one being, well, effects of damage.

 

[The 3rd Wario Brother]

I saw as another one of the many opposites from SMB to WL:SML3

Mario's natural form is small (atleast back then anyway) and can power up to be big.

In SML2:6GC it was there as a nod to Mario but then evolved into the opposite of Mario where big is natural to him and can power down to Small Wario

 

[Metal]

 

[Gigantis2k]

I'm guessing the over usage of Garlic made him more resistant to the point where turning into Small Wario in the traditional way is practically impossible, only activated in the ways you mentioned.

 

[JS Shantae]

I think it was originally meant to be like Mario when he takes damage. Later, as Wario gained more of a personality and his own series went on with the transformations this feauture became much more obsolete. In the more modern games it is just one of his forms. And sometimes, like in Smooth Moves where this transformation occurs because of the bike Penny built for him, it's just some kind of ¨throwback¨ to the early games. But I hope it will return sometime in the future.

Pretty much this. In-universe, We know Wario as someone who can drastically alter physical appearance when he is damaged in certain ways, this 'small' form being just one of many examples (and also the first we ever see.)
IRL, it was his version of 'small Mario', we see him transform into a small, pitiful gnome-esque man at the end of SML2 to show that the big, bad Wario was actually a pathetic little jealous guy all along. We see a version of this in the Mario vs. Wario comic too. This was retconned pretty quickly, obviously.