Alma is really a witch from an alternative reality from YTP who tried to avoid being abused by Bubble Bass during the game (Despite he never appeared) and tell everything to Mayor Kravindish who obviously doesn't care about her case. Alma is also the ugliest character in the series because once you saw her you will petrified by her ugliness.
She reveals that Link gave her his canteen in exchange for a kiss. Zelda smashes her mirror at the end, which apparently had Link trapped inside, possibly due to earlier machinations done by Wizzrobe, Ganon or even Lady Alma herself (It is never explained why or how Link was in the mirror). Link was freed when the mirror was destroyed.