The word describes a state whose empire is a maritime one, derived from the sea and from its naval supremacy. In earlier times, Carthage in North Africa was a thalassocracy, as was the Phoenician network of merchant cities. In later times, Portugal, Spain, Holland, and Great Britain all carved out far-flung empires for themselves mainly with warships rather than armies, and they too, are sometimes referred to as 'thalassocracies'.
But Venice more than all of them, is OF the sea. It is IN the sea. There is even a ceremony every year in May – La Sensa – when the city of Venice symbolically marries the sea. Starting in the year 1000AD, Doge Orseolo sailed out onto the lagoon with great pomp and solemnity in his ceremonial boat, and cast a gold ring into the waters with these words "We wed thee, O sea, in token of true and lasting dominion". Today, the ceremony is carried out by a local dignitary, but it still happens every year as it has for the past 1000 or so years.
Venice's empire was traditionally divided into three parts – the pre-eminent 'Dogado', which was the city and the lagoon; the 'Terrafirma', which was the city's holdings in the Veneto and other parts of Northern Italy; and the 'Mar', the overseas territories bound to Venice by sea.
The naval power of Venice came partly from its Arsenale, the dockyard that produced so many ships; partly from the fact that every one of its thousands of merchant ships were required to carry a certain amount of weaponry and armor and could be pressed into service as warships at a moment's notice; and partly from the fact that its navy never relied on slaves to pull the galley oars, the rowers were all recruited from among the citizens and this was an honourable occupation. It was also a convenient way for men who found themselves indebted to the city to work off their debts.