Understatement is the deliberate presentation of something as smaller, milder or less significant than it is. The gap between the description and the reality is left for the audience to close, and closing it themselves makes the point land harder than stating it would have.
It is hyperbole run in reverse, and it tends to read as more confident, because it declines to insist.
Frost, on the end of the world, concluding that ice would do the job as well as fire: “for destruction ice / Is also great / And would suffice.” Would suffice is doing enormous work. The restraint is what makes the line cold.
Litotes is a specific form of understatement — one that works by negating the opposite (“not unhelpful”). All litotes is understatement; most understatement is not litotes.
Understatement asks more of an audience than hyperbole does. The reader has to already know, or be able to infer, the true magnitude — otherwise the line simply reads as a modest claim and the effect is lost entirely. It therefore works best on subjects where the stakes are already established, and fails on subjects the reader is encountering for the first time.
In argument it carries a particular kind of authority. A writer who describes a serious problem mildly appears to be in command of the facts rather than alarmed by them, and that impression transfers to everything else they say. This is a genuine rhetorical advantage, and it is also worth being suspicious of: calm description is a style, not evidence of proportion.
The device is strongly associated with British and classical usage, which means it can misfire across audiences. A reader who does not share the convention may take the understatement at face value, and conclude that the writer thinks the matter is minor.
