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Maybe a parallel universe, as Alex suggested. I think of it as being fairly similar to the area where all the Celebi are from (see the 4th movie). Alternatively, it could be a physical reality in the Pokémon world, but extremely well hidden from human eyes and exploration.
There's a scene in the movie where the sky opens up and many Celebi come flying down to aid the injured Celebi. I got the impression that since they're a time traveling Pokémon, they live in an alternate universe or somewhere in the heavens. I'd go into string theory and quantum physics here, but it's early and I haven't had my coffee yet.
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