It's worth noting that what Matthew94 is suggesting only works in more recent versions of Windows. If you've got an older version, you need 7Zip or a similar program (but 7Zip is the best of the bunch for most stuff, and there's other filetypes like .rar and .7zip that no version of windows can currently decompress natively, so it's still a good idea to get it if you do have a newer computer.)

What .zip, .rar, .7zip and the like are is compression formats that save a bit of disk space, but at the cost of needing to be decompressed before their contents can be accessed. 7zip, along with Winrar and Winzip, are programs that can both read and create these compressed files. What you need to do is download and install 7zip. Once it's installed, you should be able to right click on a file saved in any of the common compreseion formats, choose something to the effect of "open with 7zip," and use the program to extract the files. You can also set it up so that opening the files automatically runs 7zip, but in my experience it doesn't do that automatically, and it's easy to pick the wrong .exe file when you set that up (hint: it's not 7zip GUI. 7zip GUI seems to be paradoxically command line based.) Right clicking is fool proof, assuming you have the program installed.

I haven't used 7zip (the software) but I do use IZArc which handles the format, along with any other compression format I've come come across. I have never had a problem with it - install it and use the context menu to do whatever you want. I assume 7zip operates the same way, as far as Matthew94 goes - right click on the compressed file (will have the extension .7zip, I suppose) and choose "Extract with 7zip" or a similar option. This will most probably create a new folder, named the same as the file, and have the contents of the archive in it. If you extract a file called awesome cat pictures.7zip you'll get a folder awesome cat pictures which contains cat pictures. See if you're don't have the folder.

Failing that, go with IZArc - it hasn't disappointed me yet and it seems dead easy to install and use.

A bit of background explanation: imagine an uncompressed demo is like an art gallery. You've got loads of different images, all spread out so it's easy for you to see them. If you were moving an art gallery, then you'd pack all the paintings into one box, as this saves you a lot of space and is a lot less hassle than sending each painting individually. When it gets at the new gallery, you'd unpack it all for the new exhibition.

As everyone else has said, just right click on the folder, and click extract, which should create a new folder that has the game in it. If there's a specific problem after doing that then post error messages etc.