Having been cast down to hell as punishment for trying to overthrow God, Satan is putting on a brave face. Although his new kingdom involves exchanging “celestial light” for “mournful gloom,” it's still Satan's kingdom all the same. This is his place—the place in which he has the freedom to do whatever he likes. (“Here at least/We shall be free”).

On the whole, it would've been better for Satan had he exercised such power in heaven, but beggars can't be choosers, and Satan can at least see the positive side of his new situation. He realizes that he can “make a heaven of hell”—that is to say, recreate a counterfeit version of heaven in hell in which he gets to act like God.

It's not the real thing, of course, but to Satan, that's not really all that important:

What matter where, if I be still the same (I, 256).

In hell, Satan has finally found a place where he can exercise absolute power and from which he cannot be expelled by God. In that sense, hell has a distinct advantage over heaven; here, no one can boss Satan around. In this fiery kingdom, he can reign secure. All in all, Satan's punishment has worked out rather well for him. For as he reflects in arguably his most famous words in Paradise Lost, it is

Better to reign in hell, than serve in heaven (I, 263).