Gresham's law is old, predating the modern widespread use of fiat currency by centuries. So the first thing to know for Gresham's law is that it's talking about coinage with significant commodity value (the coins themselves are valuable because they are made of valuable material.) The next thing to know about is "debasement". It's an ancient approach to try and cover shortages of valuable metals. Basically, use less gold/silver/whatever when you make coins and you can now pay off your debts and obligations with something that's technically the same but has less intrinsic/commodity value.
Gresham's law most obviously applies when a government first debases a currency - you've now got a large number of coins on the street that are legally the same but which possess a differences in intrinsic value. People move as quickly as they can to use the newer, debased currency to pay for things while hoarding every single one of the older, better coins they can. This quickly makes it so that the majority of coins in circulation are the newer, debased type. In this case, the "bad" currency is the new, debased currency with less intrinsic value. The "good" currency is the old, purer currency with more intrinsic value.
If you want evidence, I can show you a modern example. The United States does, in fact, mint a silver dollar (comprised of 99+% silver) which has a nominal value of one dollar. As in, if you really wanted to, you could use it to buy a soda at McDonald's or something. You could use them to pay traffic fines... but you'd be an absolute fool to pay for anything with a silver dollar, and nobody is ever going to pay you with one except as a joke/gift. They're worth over 15 dollars just in terms of raw silver, so using a silver dollar to buy something is like throwing away 14 dollars. Instead, anybody with sense uses dollar bills to pay for stuff if they're not just paying electronically.