The Dragon is a ferocious beast which lives in the mountains far above the village of Fleur de Lys. He inhabits a cave full of his horde of gold coins, and outside is a sign warning of spontaneously combustible materials. However living in the snow and ice has caused him to contract a cold, and he cannot control his sneezing fire at anything inside his cave.
When Simon encounters the dragon he throws a bottle of elephant cold remedy into the cave which knocks him out (dragons being roughly the same size as elephants). Simon then takes the fire extinguisher from the dragon's cave, and unbeknownst to the dragon climbs onto the roof and lifts out all the gold from his (meager) horde through the skylight.