Understanding how this bi-directional logic level shift works
When HV1 is the input- if HV1 is high then LV1 is high. Should be obvious.
When HV1 is pulled low, then the body diode conducts pulling LV1 down to about 0.7V. That puts about 2.6V on the MOSFET G-S, and it turns on, driving Vds down to about zero, and pulling LV1 down to almost zero.
Simulation in LTspice: