Why is my downloaded Chinese text displayed in Notepad as codes instead of Chinese words?

What appears to be happening is that the file you have uses an encoding that is not compatible with the native character encoding used by your windows version.

Programs such as web browsers have been developed to translate data between encoding schemes, you can try opening that text file with your web browser, have it use the appropriated character encoding thus allowing you to copy-and-past the file contents to another program:

Example using FireFox:

1. Open the File accessing the menu "File" -> "Open File" or using Ctrl + O;

2. After opened, go to the menu "View" -> "Character Encoding" -> "Auto-Detect" -> "Chinese";

3. The file should now be perfectly readable;

4. Copy-and-paste the contents to another program like NotePad.

You either have to install the font or the language pack to support the file you are trying to use. Here is more information from Microsoft on how to do that in Windows 7 - How do I get additional display languages?.