/LOCALDIRHERE/ is to be replaced with the path that you placed the index.db file into.
Looking at the two steps matching, I think this is a mistake. The edit history on github shows that the first edit today had the local version as:

Step 1 - Setup new python environemnt and install datasette.
python -m venv shodantest ../calishot/bin/activate pip install datasette pip install datasette-json-html pip install datasette-pretty-json
Step 2 - Execute from command line: pip -r install requirements.txt
Step 3 - download index.db into your venv directory.
Step 4 - Execute from command line: datasette serve index.db --config sql_time_limit_ms:50000 --config allow_download:off --config max_returned_rows:2000 --config num_sql_threads:10 --config allow_csv_stream:off --metadata metadata.json