HEEL UP.

To play heel up, simply raise the heel off the pedal around an inch, and keep the ball of your foot 2/3rds of the way up the pedal board. This will allow you to sink more leg and ankle into the stroke, giving you the option of increased power and speed. Typically you bury the beater into the head after the stroke playing heel up, until the next stroke. Doing this will also stop the batter skin (the one you're hitting) from resonating, so if you do this on a bass drum that has a dead sound already, you will be on your way to getting that fat punchy sound, popular in most contemporary music.

HEEL DOWN.

Heel down is where you play with your heels on the pedal board. To move the pedal you have to use the muscle on the outside of your shinbone. Typically you let the beater rebound off the drum head when playing heel down. Because this lets the bass drum resonate after the stroke, it is favored a lot amongst jazz drummers, and drummers who prefer to play softer acoustic music, because it has a longer sustained sound, not a dead punchy sound.