What is demotation?

Answer 1

In the military service a promotion is getting a higher rank, hence a demotion (less common) is being dropped down to a lower rank. By extension, it might be said that when Pluto was stated to be not a planet but a dwarf planet, a lesser class of orbiting body, it was 'demoted' in rank. It's a metaphorical use of the term.

Answer 2

Did you mean "denotation"? Denotation is the literal meaning of words in divergence to the idea or feeling that is indicates.