When we bought the house the basement was classified as unfinished. The previous owners had made a haphazard effort to convert some of it into living space, but the carpentry was so bad that you would have to be drunk to consider it livable. From what we have heard about the previous owners drunk was probably how the work was done. Anyway, this space at the bottom of the stairs was used as two bedrooms; one directly in front of you and the other through the door to the left.
We moved the bedrooms to the far corner of the basement so they could share an egress window well and used the two bedrooms as one large media room.
The tray ceiling hides the pipes for the radiant floor heat and also distracts the eye from the beam running down the middle of the room. While we needed the tray in in one spot for practical reasons running it all the way around the room created a nice visual effect.
The basement stays comfortably warm from the radiant heat for the 1st floor but we also added a gas fireplace. The ambiance is nice and it also gives us a backup source of heat if we lose power.
Because this space is primary for watching movies we painted the ceiling a dark color to keep the tv screen from reflecting on the ceiling. Dimmable wall sconces also make for easy viewing.