can anyone tell me what does mean by this?
SQL> SHUTDOWN normal
Database closed.
Database dismounted.
ORACLE instance shut down.
and also want to know if this instance is shut down can we destroy all database files and to install them from newly
TL;DR -yes, when the database is shutdown, you can remove all the files and reinstall.
An Oracle instance is the set of processes that run the database. Once these are started, the database files can be mounted or attached to the database. Finally, once these two things have happened, you can open the database in various modes, like read only, or read write.
In reverse, when the database is closed, it is no longer accessible to normal users, only to dba's who can work on the database in the mounted state. Shutting the instance down involved dismounted the storage and killing the processes of the database.
Once this is down, you can remove the installation and redo it.