Something that's downstairs is located below you, down at least one flight of stairs on a lower floor. Your downstairs bathroom is the one on the first floor of your house.
If your baseball breaks a neighbor's downstairs window, it means you hit the ball low, and when your friend says you can stay in his downstairs bedroom, you'll be sleeping on the lowest floor of his house. Downstairs is also an adverb, so you can run downstairs or trip and fall downstairs. Occasionally people also use it as a noun: "The downstairs is a mess, but we painted all of the rooms upstairs."