Young child enthralled by stories? That's an understatement (7)
I believe the answer is:
litotes
'an understatement' is the definition.
(thesaurus)
'young child enthralled by stories?' is the wordplay.
'young child' becomes 'tot' (I've seen this before).
'enthralled by' is an insertion indicator ('enthral' can mean 'capture').
'stories?' becomes 'lies' (story is a kind of lie).
'tot' placed inside 'lies' is 'LITOTES'.
'that's' is the link.
(Other definitions for litotes that I've seen before include "Possibly, no small surprise" , "Literary use of understatement" , "No little pain, say" , "Town of N. Norway" , "Ironic figure of speech" .)