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Okay, as I searched the forum and I didn't find a complete tutorial on how to lower my car with vag-com. I tried asking here for help but no answers. Then I searched more and more around and finally found something that helped me. As others have tried it here and ended up car being higher than before, I'll post the tutorial I found in another forum with some additional detailed notes that I could have used and would have appriciated during my trials.
Note: this was tried successfully on 2007 audi S8 with version vag-com 10.6. Vag-com button labels and window layouts might be bit different in other versions but shouldn't be anything big. Also you should read through before continuing.

First park the car in the garage on level ground. Turn the ignition on and insert the Vag cable into the obd2 scan port under the driver's left side knee cover area. Connect the cable to the car first and then connect the cable to the laptop. Now everything should be ready.

Now select control module 34 - Level Control. Open "Coding" button and the stock code read like this:

0015510 (xxx55xx)

The only numbers that matter are the two fives in the middle. Each integral drop in number corresponds to a 5mm drop. For example, I made a 20mm front and 15mm rear drop so I entered:

0011210 (xxx12xx)

After this turn off the car and then start the engine. Now need to be outside of the car so close all the car doors and grab your laptop trough the driver side window.
Now select control module 34 - level control again. Now click on "Security access" button. Now you should enter 31564. (Vag-com information bubble should also pop up and display the code).

Important: Once you enter this, the adaptation needs to be completed from beginning or else the car will not adapt to your new settings and it will go into a limp mode for the suspension. On the dash there should be a yellow suspension error light but that will disappear as soon as the adaptation is completed. Also car doors must stay closed until the adaptation is completed otherwise it will fail.

After entering the security code, press on the "Adaptation" button. There are five channels that should be changed:

01 Front Driver
02 Front Passenger
03 Rear Driver
04 Rear Passenger
05 Save

First select 01 and then WAIT. The car will lower to (possibly) minimum height and raise its suspension to normal again. After its complete the vag-com status windows says it's ready you will need measure the distance from center axle to the bottom of the fender lip on the front driver side wheel (make sure to measure in millimeters).
Enter the measured distance in the new value input box and press on "Test" button. Now check if car accepts this value by showing "valid" in one of the 4 boxes at the top of the window (should be second from the left). If the box shows "invalid" or is switching between valid and invalid, then start "rocking" the car a bit until it stays on "valid".

Note: if you enter a number that is lower than stored value, then the car will go up and vica versa. So if you want the car to lower, new value should be higher than the value it shows you.
(Example: if car height should be 376 mm but new value (measured value) is 386 mm, then the car will lower itself by 10 mm to reach the 376 mm height.)

Then click on save and do this same thing for channels 02, 03, and 04.

Note: If it says "Error: security access required", you should close the adaptation window and go back to entering the security code part.

When you are done, go to channel 05 and enter 1. This saves the adaptation. After that you can close the adaptation window.

Now in few seconds the car should change suspension heights for every wheel but to be sure you could get into the car and then drive back and fourth about 15-20 feet.

Repeat the adaptation and you should notice that the values in the read section should be fairly close to what you measure. If not, continue to adapt until its right.

Thanks to Der Kimbo for original post and any feedback is welcome.
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