Direct speech is that speech which is said without any modification...the way it  direct speech is what was originally said - it has inverted commas and is usually expressed using - she said, he said x said etc. for eg. Anita said," im going to school." etc

In indirect speech the verse said by a person is expressed in another form to a person with certain modifications-
                             (i) There are no inverted commas.
                             (ii) the word 'that' appears  
                             (iii) sentences that were in present tense change into past eg.  she said that she was going to school 
sentences in past tense change into past perfect eg. she said she had been here.
                             (iv) yesterday changes into the day before, today becoms that day, tomorrow becomes the next day and so on.
eg. he said" i was there in the shop yesterday." becomes 
He said that he HAD BEEN there in the shop the previous day.