I'd agree this looks like abalone rather than mother of pearl. Abalone seems to have been quite widely used for decoration in oriental pieces, often in combination with mother of pearl. I have a 19th century Japanese lacquer box covered in abalone and a more modern Korean lacquer vase with abalone inlay.
I can't tell what the first character (reading from the top down) says as it's in a stylised or archaic form, however the central character is 天 (tian1) meaning sky/ heaven and the third character looks to be 眞, which, according to nciku.com is a variant of 真 (zhen1) which means true/ genuine. I'll ask my 老婆 if she recognises the first character...
Some more pictures of the vase would also be helpful for ID, specifically the base/ foot. Also is the red colour paint or a glaze or is it the colour of the body?
Steven