What is Top Down Design Approach?
Top down design is an option to create new parts within assembly. In that case, constraints are the existing geometry elements from other parts within assembly: lines, planes, surfaces, points, vertices. Very useful option, also can be dangerous if you're not careful - the newly created component has a minimal number of it's own space constraints and only one mate type - in SWX labeled as "In Place".
My understanding of Top Down Design Approach is that all parts in an assembly reference each other for size (through in-context mates and/or sketches located in the assembly). A properly built top down assembly will update all parts automatically, when you make a change. In a Bottom Up assembly, you need to revise parts manually to make sure they fit and function as planned. So, in theory, Top Down is best, but it can be hard to manage when lots of files change automatically, especially when something is not working as expected.
A top-down design project starts with the broad project specification in mind and putting that information in a centralized location. The design process progresses by communicating the centralized information to the individual parts.
In bottom-up approach, the individual parts are designed to fulfil the intended function and then put together to form assemblies of a product. After the assembly is in place, problems are identified and modifications to individual components are made. As components are independent of each other, if one component is modified, the related components have to be changed manually.
You can have a look at the following blog post for detail description.