Just like OP, I'm also at the beginner level at financial trading, but I think you're explaining either options or margin with your first sentence, right? With shorting you borrow a stock (where you pay interest on it) and immediately sell it. When the price of stock falls, you then buy it and return it. Is this correct?
However, options are NOT like this. With options, the write side could receive a premium on their side of a contract for guaranteeing either to sell the shares at a specified price (a write-call) or guaranteeing to buy the shares at a specified price (a write-put). In either case, the person buying that contract can choose to either execute that contract or let it expire, meaning it could be the case that the writer (who receives a premium) may never have to act further (because the contract buyer never executes it, so the writer just pockets the full premium).
Short interest is the number of shares in all the short positions that have been opened but not closed yet, and it is a bearish indicator. It doesn’t necessarily mean that MANY people think the market is going to underperform though, it could actually be just a handful of hedge funds with massive positions.
It also doesn’t have too much to do with the long term performance of a company. It’s probably better to interpret it as a view on the share price rather than on the long-term performance of the company. (interpreting any financial ratio or metric in isolation is tough)
Another interesting implication of high short interest is this idea of “Days To Cover” which is short interest / average daily volume.
In situations where days to cover is very high, shorts can find themselves unable to close their positions, even though the market is moving away from them (aka up). This leads to a short squeeze - famously with GME this year.