Towers of Hanoi is an excellent example of how recursion can simplify a given problem. The idea is as follows: you have to move N disks from a source stack to a destination stack, one disk at a time and you can never put a larger disk on a smaller one. You can use an auxiliary stack. Let's say N = 10. You have no idea how to solve it. But you can make the problem simpler (you hope):
move 9 disks to the auxiliary stack,
move the remaining (and largest!) disk to the destination stack, and
move the 9 disks from the auxiliary stack to the destination stack
Again, you have no idea how to move a 9 disk stack, but that's no problem either:
move 8 disks from the auxiliary stack to the source stack,
move the remaining disk to the destination stack (there are 2 disks now), and
move the 8 disks from the source stack to the destination stack
Repeat this until the stack you have to move is only 1 disk big.
About the number of disks going up again: you call the function recursively for N-1 disks, which in the function is assigned to N. This N only exists until the function ends, and returns to the previous level. Then you get the old value of N again.