The Wraith-world was a mysterious alternative aspect of reality, into which the Ring could partly draw its wearer. Certain beings, such as the Ringwraiths, seem to have led a dual existence on the boundary between two worlds: our own world and the Wraith-world. While they had a partial form in our reality, they seem to have had a more solid existence in their own world. They also had the ability to draw others into their reality, and attempted this with Frodo through the use of an enchanted weapon. This power to draw others into their realm seems to have been used to terrorise their servants, too - 'they skin the body off you as soon as look at you, and leave you all cold in the dark on the other side', says Gorbag in The Two Towers IV 10.
The Wraith-world was not populated by wraiths and Ring-bearers alone: the Elves existed in a brilliant, shining form on the other side of the threshold. At least, Frodo saw Glorfindel in this form while on the brink of the Wraith-world himself, and Gandalf later suggested that this nature was common to the High Elves.
Though Tolkien goes into very little detail about this 'other side' to reality, it is mentioned often in accounts that have come down to our own time through folklore. In these stories, it is commonplace to find fairies and elves - and less friendly beings - moving between our world and their own mysterious realm. Indeed, these stories are, in part, the origin of the idea of 'fairyland', and it seems plausible that Tolkien's idea of the ghostly Wraith-world is in some way related to them. In the end, though, he gives us so little information that it is hard to do more than speculate the subject.