The line in this excerpt from The Still Alarm by George S. Kaufman that demonstrates the use of understatement is "FIRST FIREMAN (feels the wall): It's pretty bad right now. "
Understatement refers to what is known to be true is conveyed less to create emphasis. Such statements downplay an important concept of the situation. Such statements are used to create irony or humorous tone.
Kaufman through this understatements mock the British and to parody British society. The calm manner of the characters in such a situation exemplifies the stiffness and excessive proper manner in which British act. For instance in such a fire ED is calm and is concerned about being proper by folding his shirt properly in a fire, also being calm of not being able to open the door of another room. Such reaction in a fire would not be considered normal. Hence, Kaufman mocks the stiffness and how amusing the ED reaction of being unaffected he is and not in hurry to go outside of the building safely.