Hellstone is found on the lowest layer of Terraria, making the ground along with ash blocks. It looks like a red stone block. Hellstone can be smelted with obsidian to create a hellstone bar.
Mining hellstone can be a strenuous task, as without out at least shadow armour, you will be constantly pelted by Fire Imps' fireballs and/or bashed about by Bone Serpents. Using a Nightmare Pickaxe you should proceed down to the bottom of Terraria, and mine hellstone rapidly, so Fire Imps don't kill you instantly, you could fill up areas you've mined to prevent them from spawning. Face Fire Imps while mining to destroy their fireballs (there is a possibility you could get a heart, healing 20 of your health).