There are times when you may decide to play lower limits than you usually do, for reasons pertaining to table selection (the art of finding a really good and juicy table) - but this is not what this chapter is about.
As with moving up, there's no clear cut answer to when you should move down in limits. Your bankroll may take a large beating either because you have bad luck, or you're outmatched - or a combination - and you find yourself in a spot where a buy-in at your regular table suddenly costs a large portion of your entire bankroll. This is when you must consider stepping down a notch, regardless of why the money has evaporated. Even if you've played every hand expertly, but the cards simply weren't turning your way, you must recognize when it's time to move down. Failing to do so will almost invariably bring along with it some kind of tilt, and that's the best way to make sure all of it disappears: You may find yourself playing too passively (because your bankroll can't afford another loss), or bluffing wildly (because you have to win back some of it), or experience other impulses that are highly detrimental to the remains of your bankroll.
If you need a rule of thumb, I'll offer this: If you slip down below 150 big bets of the limit you currently play (300 big blinds if you play no-limit), step down. Re-evaluate your game, read a poker book, make sure to play only one table at a time for awhile. Running bad always makes one's confidence take a toll, and you'll need that confidence when you sit down at a table. 150BB at the higher limit should be somewhere between 225-300BB at the limit below, and that should keep you covered for awhile longer, even if this downstreak lasts.
Having a rough downswing is psychologically heavy, but perhaps there's some comfort in knowing that every poker player - all of us - have this happen to us. It's unavoidable. It's why we have the 300BB bankrolls. Take a deep breath, and let poker rest for awhile, and you'll feel better about it eventually. Re-reading pokerbooks is a great way to re-affirm your belief in poker as a game of skill, regardless of how desperately your mind wants to scream that it's all just dumb luck.
But let's hope this chapter won't have to apply to you.