In this excerpt from "The Still Alarm" by George S. Kaufman, the line that demonstrates the use of understatement is:
"Yes, sir. The lower part of the hotel is about gone, sir."
An understatement, in literature, is a figure of speech employed to intentionally make a situation seem less important than it really is.
While what the Bellboy is saying is a very serious matter (the whole lower part of the hotel is burning), he expresses it with a calmness that feels inappropiate for the situation; as if it was not important at all. Therefore, this line is an understatement.