We know that the Underground Man has been underground for twenty years, but he tells stories about his interactions with the world sixteen years ago. So when he talks about being "underground," he's speaking metaphorically.
So think about what this indicates. Underground = isolated. The Underground Man is solitary. When he witnesses other people speaking, he describes it as "listening through a crack under the floor." When he speaks to others, he imagines himself coming "out into the light of day." When he oscillates between wanting friends and preferring his solitude, it is a decision between the real world and his imagined world underground.
Why underground? That is, why doesn't the Underground Man imagine himself indoors, or in a closet, or behind a tree? What is it about being underground that is such a powerful image? Well, taken literally, if the Underground Man is under the ground, he's beneath us. What we're getting at is the connotation of inferiority – fascinating, since all the guy seems to do is tell us he's "more intelligent" than any of the men walking around above him. This conflict – the fragile ego afraid of being "beneath" and convincing itself it's "above" – is central to Notes from the Underground.