What do the items beneath other items in the "tree" mean?

If there's items above another, it means that one item builds into another. For example, two amplifying tomes + 330g turn into a hextech revolver, a vampiric sceptre + pickaxe + 250g turn into a Bilgewater cutlass, and hextech revolver + Bilgewater cutlass + 275g turn into a Hextech Gunblade.

They are part of the recipe for the item you are looking at.

So do I buy those items first? Or should I just buy the top item?

you can buy the bottom items first, they are much cheaper. the costs of the bottom items in your inventory are subtracted from the top item's overall cost, since you already own a part of the recipe. Once you buy the top item, all the bottom items disapear from you inventory aswell.

Thanks everyone.