World Wide Words to the rescue! (More at http://www.worldwidewords.org/qa/qa-sea1.htm)
The phrase is a quotation from Shakespeare. It comes from Ariel’s wonderfully evocative song in The Tempest:
Full fathom five thy father lies:
Of his bones are coral made:
Those are pearls that were his eyes:
Nothing of him that doth fade
But doth suffer a sea-change
Into something rich and strange.
Michael Quinion runs World Wide Words and has a brilliant weekly newsletter on words and language, plus several books.