Yea FIFE can be used to make top-down games, the shooter demo is one example.
The objects are a kind of template, you can instantiate instances of a object. The instances are the real ingame objects, so you can e.g. move or rotate a instance. You can create instances and objects on runtime.
So you have an object which defines a ship, the actions like stand, move, and other settings like blocking. Then you can create instances of the ship object. The instance use the object data but have also own values like position, speed, currently used action and so on.