Vibrato is the pitch and volume to make a quivering sound. I personally use my diaphragm muscles to pulse the air coming out of my lungs to achieve this effect.
About this exercise#
Vibrato is a gentle, regular wobble in pitch and volume that keeps a held note alive instead of flat and static. On the ocarina it comes from the breath rather than the fingers. Pulse the air with your diaphragm, the same muscles you would use to pant quietly, and let each pulse push the tone a touch louder and back again. Begin slowly and evenly, counting the pulses, before you try to speed them up; an uneven vibrato is more distracting than none at all. Long, sustained notes at the end of a phrase are the best place to add it.