Young Link's Kokiri sword makes fire?

Solution 1:

It's called a Meteor Smash. From that page, here's a quick excerpt on how Young Link's Down Arial Meteor Smash is done.

Young Link thrusts and holds his sword under him for a while. If you hit the opponent with the hilt of the sword, they will be dealt fire damage and Meteor Smashed (sometimes referred to as the 'Dragon Down aerial'). Therefore, the opponent has to be directly above Young Link for it to work. For some strange reason, Young Link can Meteor Smash with this move if the opponent is to the far side of him, too.

As for their usefulness, the moves are very powerful and can be very damaging moves, but also aren't great at KO-ing opponents in most cases. Also, Meteor Smash attacks can be cancelled by jumping right after being hit by the attack (called Meteor Cancelling). But on opponents who don't recover well, it can be an effective attack strategy still.