As others mentioned in this thread, your download zip is not the theme itself. It is a collection of theme + documentation + PSD + other optional resources. You will need to unzip the download first. Next, either go through the documentation for installation instructions, or find the actual theme folder, say 'xyz'.
That theme folder should be uploaded to the wp-content/themes/ directory. You can do so by using an FTP program, or by zipping the 'xyz' folder and uploading it via WordPress admin.