Presumably, the non-refundable rate was cheaper, at the time you booked it, than refundable rates were at the same time. You chose a guaranteed saving then over the possibility that a lower rate might become available later. More often, as you get closer to the day, rates tend to go up, so this is usually a winning strategy. In this case, it wasn't, but that's one of the risks you take with non-refundable rates.

I'd call the hotel, tell them you made a mistake in cancelling, and ask them to reinstate your original reservation exactly as it was.

And I agree with those who feel the thread title is misleading. In no way did the hotel scam you. They made the reasonable assumption that you understood what you were buying, and did exactly what they said they would do and that you agreed to. If anyone is trying to scam anyone here, you are trying to scam the hotel by cancelling a non-refundable reservation, for no reason except that rates have gone down as they are known to do once in a while, and trying to get a refund while booking at the new rate.