For those who have never heard of this song, "Down by the Bay" is a playful game of rhyming words.
You first sing the first four lines with every verse"
"Down by the bay, where the watermills grow
Back to my home, I dare not go
For if I do, my mother will say
[insert silly rhyme]
Down by the bay!"
The rhymes can range from the simple ("Have you ever seen a bear combing his hair?") to the outright ridiculous ("Have you ever seen a whale with a polka dot tail?", but overall the point of the song is to create nonsense.
But words can't beat actually seeing it: Here's Raffi singing it.